Home > Managing Debt > One-Third of Americans Have Collection Accounts: Are You One of Them?

Comments 0 Comments

More than a third of Americans with credit files have a debt in collections, the Urban Institute reports in its new analysis of delinquent debt in America. Many of these consumers are unaware of the collection account, and a large share of these debtors have no traditional credit history, as rent, utility and medical bills are sent to collections if they’re past due but are not typically reported to credit bureaus if current.

The Urban Institute’s numbers are based on 2013 credit bureau data from TransUnion and do not include information on the 22 million Americans (9% of the population) without credit files.

Among consumers with a credit report, 5.3% are at least 30 days past due on a credit card or other non-mortgage account. For these consumers, escaping delinquency can be quite challenging, with the average consumer with a past-due debt needing to pay $2,258 to return to current status on the account, the report says.

Oftentimes, those delinquent debts are sent to collections, an industry with seemingly no shortage in business. A Federal Reserve report from 2004 found 36.5% of consumers with credit reports had an account in collections. The years between the Fed and Urban reports were nothing short of tumultuous, but overall, collections accounts have maintained a strong presence in Americans’ finances.

Consumers with a collection account owed an average $5,178, the Urban Institute found, but bills sent to debt collectors vary from the seemingly insignificant (parking tickets, library fines, membership dues) to the overwhelming (unpaid rent, bounced checks, student loans). For people with a combination of accounts past due and in collections, they owed debt collectors $9,123 on average, as opposed to people with only collections accounts and an average $4,641 outstanding. The research showed Americans with debt reported by collections agencies are heavily concentrated in the South.

Do You Have a Bill in Collections?

You may not even be aware you have a collection account. Sometimes, debt collectors are unable to reach debtors, particularly if your contact information has changed since your bill went unpaid, and collections items will damage your credit standing without your knowledge.

“Consumers are sometimes shocked to discover collection accounts on their credit reports, especially if they didn’t know a bill was past due,” said Gerri Detweiler, Credit.com’s director of consumer education. “Medical bills that slip through the cracks, or final utility or cell phone bills may show up as collection accounts even before the consumer knows there is a problem.”

Paid or not, collection accounts are reported for 7 years plus 180 days from the date you first fell behind. Some credit scoring models don’t count paid collections, but that’s often not the case. Here are seven things you should know about how collection accounts affect your credit scores.

To see if you have a collection account on your credit report, you can request your free annual credit reports from credit bureaus Equifax, Experian and TransUnion. You can check your credit more frequently by monitoring your credit scores, which will drop if a negative item pops up on your credit report after you’ve most recently checked it. You can watch your credit for collection accounts by getting your free credit scores through Credit.com.

More on Managing Debt:

Image: Mia Caruana

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team