35% of American Consumers Have Overdue, Unpaid Debt

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Despite an improved economy and some tough lessons learned from the Great Recession, Americans are still saddled with debt, although there has been a great deal of emphasis on returning to prudent money management.

Many organizations are offering classes and other resources to impart financial literacy. Still, perhaps because a prolonged period of serious unemployment or under-employment has devastated so many Americans, much of the nation is deep in the red.

Debt Delinquency Cycle for Unsecured Credit

The archetypal path taken by a consumer account from current to charged-off.

Americans in Debt Chart

Note:Federal regulations require creditors to charge-off revolving credit accounts (e.g.,credit card accounts) after 180 days of payment delinquency.Uniform Retail Credit Classification and Account Management Policy, 65 FR 36903-01(June 12,2000).

New, Disturbing Data from the Urban Institute

To crunch these most recent numbers, the Urban Institute, a non-profit, partnered with the Consumer Credit Research Institute, which is dedicated to understanding consumer financial decision making especially within sub-prime credit and low- and moderate-income populations. The Delinquent Debt in America report used information from TransUnion from 2013 to measure how many Americans are reported as at least 30 days late on a non-mortgage payment. The report also examined how many Americans have debt reported as in collections and the amount of the debt.

Among the most significant findings in the report, which gathered data from millions of Americans, is that 35% of adults who have a credit file were also in debt collection. That means that debt collectors were trying to get approximately 77 million Americans to pay off delinquent loans and other financial obligations.

Big Debts Going Unpaid

These adults owed an average of more than $5,000 that was more than 180 days past due. That includes a variety of different kinds of debt ranging from credit card debts to medical bills and utility bills.

What may come as a big shock to many people is that “debt in collections” involves debts that are not mortgage related. The reason being is your house can be used as collateral. So instead of sending a mortgage to a collection agency, the bank just initiates a foreclosure that leads to the seizure of your home. The data also revealed that 5.3% of all people in the U.S. who had a credit file had a report indicating they were between 30 and 180 days late on a non-mortgage payment. It’s important that we mention “those who have a credit file” because over 22 million American adults don’t have a credit profile.

Geographic Data

  • Among the states, Nevada had the highest percentage of residents with debt in collections at 47%. They also had the highest average amount owed at $7,198. That was helped in part by the Las Vegas metro area, where an alarming 49% of residents had debt in collections.
  • By contrast, North Dakota had the lowest percentage of residents with debt in collections at just 19%, while the District of Columbia had the lowest average dollar amount owed per person at $3,547.
  • Both debt in collections and debt past due were concentrated in the South. Regionally, the South had the highest percentage of people, as high as 44% in some parts, while the Northeast had the lowest at less than 30%.
  • Among the 100 largest metropolitan areas, Minneapolis-St. Paul had the lowest percentage of residents with debt in collections at 20%, while McAllen, Texas claimed the highest percentage at 51%.

Other Related Information

Credit card debt won't go into collections until it is 180 days past due, but once a debt is in collection and gets reported to the credit agencies and it can remain there for up to seven years. That’s true even if you have managed to pay off the debt. As a result, even one delinquent debt can have a seriously negative impact on your credit history, credit score and ability to borrow for years to come.

The complete report provides helpful information and insights to becoming debt free and improving your credit history.

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