1 in 3 Americans is dogged by debt collectionsSubmitted by Diamond Dog on Thu, 07/31/2014 - 12:55
By Quentin Fottrell, MarketWatch
July 30, 2014
Americans are taking a hit on their credit scores by ignoring overdue debt.
One in three adults have a debt in collections reported in their credit files, according to a new report by the Urban Institute, a nonprofit organization that focuses on social and economic policy. And more than 77 million Americans owe an average of $5,200. Debt in collections refers to a debt that is 180 days past due and includes a credit card balance, child-support obligation, medical or utility bill, parking ticket and overdue membership fees, but excludes mortgage-related debt.
“This delinquent debt can harm credit scores and that can restrict access to credit and increase the cost of credit and insurance and tip employer decisions,” says Caroline Ratcliffe, a senior fellow at the Urban Institute.
Credit files give a more detailed picture of a person’s debt obligations than a credit report. What’s more, the debt can remain in a person’s credit file for seven years, she says, and many consumers may not know they are delinquent and only become aware of collections debt when they review their credit report.
So why don’t people take action? They may be embarrassed, believe that financial counseling costs too much or will damage their credit report, says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. Counseling through an NFCC member agency is either free or low cost, she says.