A study by the Urban Institute of Washington, DC, showed that 35% of Americans currently have a debt in collections – and that Texas leads the pack when it comes to delinquencies.
Dallas, El Paso, Houston, McAllen and San Antonio all have a high percentage of people with debts in collections. McAllen has the most debt-ridden consumers, with almost 52% of its residents facing collections agency calls. Dallas, El Paso and San Antonio each have a 44% rate, and Houston is just shy of the 44% mark.
GreenPath Debt Solutions, a nationwide nonprofit credit counseling company, theorized why Texas has such a high rate of debt delinquencies, listed four reasons that Texans might have more trouble paying off debt than people in the rest of the country:
Texas has a high number of people working in service and construction jobs – typically unstable industries.
Many people retire in Texas, and retirees usually have a fixed income. This can make it hard to pay off bills, especially medical bills that older people are more likely to face.
It’s common for families to live paycheck-to-paycheck, using credit cards to bridge the gap in an emergency.
Texas offers very little in the way of financial education, especially when it comes to credit reports. Many residents are not aware that medical bills and other debts in collections are impacting their credit scores.
Eric Salazar, GreenPath’s Texas branch manager, suggests Texans and others review their credit reports regularly to ensure accuracy. “They should reach out to a non-profit credit counseling organization if they need help understanding the report or resolving their debt,” he said.
The importance of a good credit score
A good credit score is needed to secure a low interest rate on a mortgage, car loan or personal loan, as well as to be approved for an apartment or get hired at certain jobs. Credit scores are calculated according to five factors:
Amount of debt relative to amount of available credit
Length of credit history
Number of new credit accounts opened
Variety of types of credit
The most important thing to do to ensure good credit is to make all credit card payments on time, use less than 30% of your available credit (avoid maxing out credit cards), keep accounts open and in good standing, and refrain from applying for too much new credit in a short amount of time.
Nonprofit agencies like GreenPath can help consumers take a clear look at their financial situation, review their credit reports and make a plan to pay down debt and bring accounts into good standing.