According to new studies produced by the Urban Institute, Americans are in debt – a lot of it. The average adult American with a credit file has an average of $50,000 in debt, and more than one third of those Americans, about 77 million, have had at least some of those debts in collection last year. The report is based on data from TransUnion, one of the three major credit reporting agencies. For a debt to be passed on to a collection agency, it must be more than 180 days past due. This report also revealed that geography played a major role in identifying where the larger indebted individuals live. The national average for debts in collection was $5,178.
When looking at the study, metro areas with higher density have significantly higher debt levels. This is understandable because the cost of living (housing and necessities) tend to be more expensive, also these areas typically have a higher concentration of college graduates; meaning more mortgage and student loan debt. However, these forms of debt are typically considered “good” forms of debt, because homeownership is an asset and studies have shown that higher education usually leads to increased earning potential over a lifetime. When mortgage based debt was removed, the maps painted a very different picture: the majority of heavily indebted, in collection debt was in the southern region of the country. This suggests these areas do not have access to the same amount of resources and opportunities as the rest of the country, requiring individuals to take on more consumer debt.
Twelve states have debt delinquency rates above 40%, and eleven of those states are in the south. Large amounts of debt and debt delinquency are extremely difficult for individuals to manage, usually leading to a drop in a person’s credit score, lack of access to credit, and can even restrict employment opportunities.
Counseling and training continues to one of the most effective measures for helping individuals not only understand, but manage and tackle their debt. Manna’s Homebuyer Club, a program that provides various forms of credit counseling and homebuyer education, is a great example of a program that meets people where they are, and empowering them along the road of success.