Study: One in Three Americans with Credit File Has Debt in Collections

If you’re hiding a dirty little credit secret—a debt in collections—you have plenty of company. You won’t be the only person at those Debtors Anonymous meetings you’ve been thinking about attending. A recent Urban Institute study finds that 35% of adults who have a credit file have an overdue account that has ended up in the not-so-loving arms of a debt collector.

The Urban Institute partnered with Encore Capital Group’s Consumer Credit Research Institute to conduct the study. The results showed that the 77 million Americans who have a debt in collections owed an average of $5,200 last September.

Nevada is at the top of the list of states with major debt troubles. About 47% of Nevadans with a credit file have a debt in collections. Residents also have the highest average collections debt— $7,198.

Know that having a debt in collections is a negative mark on your credit report that will remain for seven years. Your payment history accounts for 35% of your FICO score, so a past due account will mean this score will take quite a hit. The number of points lost due to collections will vary depending on your overall credit history. Generally, the more accounts you have in collections, and the more recent each of those collections, the lower your score.