Home > Managing Debt > The States Where Debt Collectors Are the Busiest

Comments 0 Comments

Does being surrounded by people in debt make you more likely to land in debt? That’s one of the provocative questions posed by a new Urban Institute report that examines possible links between geography, neighborhood characteristics and unpaid bills.

While one-third of Americans have a debt in collections on their credit report, that burden is not evenly distributed around the U.S., the report says. For example, residents in Nevada, South Carolina, Mississippi or Texas are more than twice as likely to have an overdue debt than those in North Dakota, Minnesota, Hawaii or Massachusetts.

In general, residents from states in the South and West are far more likely to have overdue debts than those in the Northeast or Midwest, the study shows. (Having a lot of debt, including debt that goes into collections, can affect your credit. To get an idea of where your credit stands, you can view your free credit report summary on Credit.com.)

“While no one would dismiss the importance of individual-level factors when explaining the over-accumulation of debt, and of debt that enters into collections, a robust and growing literature finds that individuals’ financial outcomes are influenced not just by their personal and family dynamics but by the communities in which they live,” the report says.


The Urban Institute examined a random sample of 7 million U.S. consumers’ credit reports from TransUnion’s credit bureau data from September 2013. The data only includes those with a credit file, so the estimated 26 million U.S. consumers without this information (who are more likely to be black, Hispanic and have lower income) are not considered. The report notes that because these groups weren’t factored into the study, they are likely under-represented in the sample.

Correlations Between Debt & Personal Characteristics

There is a connection between indebtedness and several local characteristics, the report suggests, including health insurance coverage rates, unemployment levels, educational attainment, ethnicity and home values. For example, the average neighborhood uninsured rate for individuals without debt in collections is 13.6%, and 17.7% for those with debt in collections. The homeownership rates for those with debts in collection is 62.2%, compared to 68.3% for those without debt.

Among those with debt in collections, the average amount owed is more than $5,000. The median is $1,589.

“Our findings highlight how pervasive debt in collections is,” the report says. “Debt is geographically concentrated … And the average amount of debt in collections is high in states that were most affected by the foreclosure crisis.”

It’s clear how a lack of health insurance coverage could lead to more unpaid debts — a Federal Reserve study in 2014 found that half of all debts in collections are medical debts. Unemployment or foreclosure rates also suggest a direct link. It’s less clear why other characteristics — such as falling home values— would lead to unpaid bills, though that could be a marker of neighborhoods in distress. And underwater homes create other financial stress for owners, such as the inability to refinance, obtain a home equity loan or sell.

Debt & Your Neighborhood

The report theorizes that a “local-level” effect may be at play.

“For example, areas with a high share of unemployed people might make everyone in the area more likely to have debt in collections, regardless of whether the individual is unemployed,” according to the report. “In this case, just being surrounded by unemployed people affects whether a person has debt in collections — possibly through the networks available.”

Given this apparent connection between neighborhood characteristics and debt, the report theorizes that changes in issues like health care coverage or housing values could have a dramatic secondary impact on debt levels.

“Back-of-the-envelope calculations based on the magnitude of our measured relationships suggest that local conditions may play an important role in financial distress,” the report says. “For example, if the share of properties with negative equity across the United States was 10 percentage points lower, then the country might have an estimated $14 billion less in aggregate debt in collections.”

As a local example, the report suggests that if the housing market in Prince George’s County, just outside Washington, D.C., had the same rates of underwater mortgages as that of neighboring Montgomery County, Prince George’s residents could have an estimated $262 million less in debt in collections.

In a similar way, a 5 percentage point increase in health insurance coverage could reduce national debt in collections by $22 billion, the report says.

Here are the top 10 most and least indebted states in the U.S., broken down by percentage of residents with a bill in collections and average debt.

Highest Debt in Collections Rate

  1. Nevada: 43.5% & $2,968
  2. South Carolina: 42.6% & $2,350
  3. Mississippi: 41.9% & $1,892
  4. Texas: 41.6% & $2,116
  5. Louisiana: 40.0% & $1,724
  6. Georgia: 39.0% & $1,804
  7. D.C.: 38.8% & $1,346
  8. Florida: 38.3% & $2,358
  9. Alabama: 37.9% & $2,052
  10. West Virginia: 37.6% & $1,876

Lowest Debt in Collections Rate

  1. North Dakota: 17.1% & $901
  2. Minnesota: 18.2% & $1,002
  3. Hawaii: 20.5% & $1,172
  4. Massachusetts: 21.5% & $973
  5. South Dakota: 22.5% & $1,452
  6. Nebraska: 23.0% & $1,258
  7. Montana: 23.5% & $1,556
  8. Iowa: 24.0% & $1,169
  9. Connecticut: 24.5% & $1,121
  10. Wisconsin: 24.6% & $1,278

More Money-Saving Reads:

Image: AndreyPopov

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.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

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.

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