Debt Hotspots Unveiled: Is Your State on the List?

A recent report by WalletHub has revealed the states in which people are struggling the most financially. Here are their findings.

WalletHub’s State Rankings

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WalletHub analyzed all 50 states to find where people have the most collection accounts – which are debts sold to debt collection agencies due to lack of payments.

These debt agencies then create an account for the money owed, hence the term collection account.

Impact on Credit Scores

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Having a collection account on file will hurt your credit score, which can impact any applications for mortgages, loans, and overdrafts and may increase interest rates on any loans you are offered. 

Seven Years on Record

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Collection accounts stay on your credit report for seven years. 

Analyzing Financial Health

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WalletHub compared each state’s collection accounts based on factors like the average number per person and amount owed per account, analyzing changes between Q3 and Q4 2023.

WalletHub’s Methodology

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Each factor was graded on a 100-point scale, and each state was given an overall total score to determine its ranking.

Managing Debt Wisely

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This all helps paint a picture of the financial challenges people in different states are facing and highlights the importance of managing debt wisely.

Standout States

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There are a few standouts when it comes to states with the highest number of collection accounts. Let’s take a look at some of the top states.

Wyoming’s Debt Burden

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Wyoming tops the list with the highest number of collection accounts per person and a WalletHub total score of 83.46. On average, each resident has about 4.1 collection accounts – a huge burden on families across the state.

These accounts carry an average balance of around $1,984, adding up to a significant amount of debt. 

Examining Financial Stress

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While this is a concern for many Wyoming residents, WalletHub did point out that “Collection accounts aren’t increasing as quickly in Wyoming as they are in other states.”

Out of 50 states, Wyoming had the 14th-highest increase in accounts, and overall, there was a small decrease in the average dollar amount owed.

Texas’ Collection Account Situation

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Texas isn’t far behind Wyoming, with an average of 3 collection accounts per person and scoring 70.81. The average balance per account is about $1,400.

While Texas falls in the middle when it comes to increases in the amount of collection accounts in 2023, many residents are still facing challenges managing these debts. 

Middle Ground

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Texas was relatively middle ground for both increases in debt (the 20th highest state) and for debt-balance decreases – ranking 24th.

Montana’s Financial Picture

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Montana’s total score was 69.68, making it third with nearly three collection accounts per person and an average debt of $1,513 per account, which is also quite substantial. 

Debt Trends

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During the Q3-Q4 period, the amount owed on these accounts went up by 5.4%, but there was also a drop in the number of accounts per person.

This shows that while people are paying off some debts, they still have a way to go in managing their overall debts.

Nevada’s Debt Challenges

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Nevada comes in fourth place with a total score of 68.06, ranking fifth in the amount of collection accounts and balance per account. It also ranked 11th on an increase in collection accounts debt.

Delaware’s Position

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Delaware rounds out the top five with a total score of 59.88. It has a moderate number of collection accounts per person and an average balance per account, but it ranks higher for increases in debt.

States with Lower Collection Accounts Issues

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New York, Mississippi, and Hawaii ranked the lowest, indicating they have relatively fewer collection account issues compared to other states, and therefore, there is less impact on credit scores.

What Does This Mean for You?

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If you live in a state with a lot of collection accounts, it’s a sign that many people are struggling with debts. It’s essential to manage your debts carefully and keep an eye on your credit report to avoid ending up in a similar situation – being aware of these financial challenges can help you make smarter decisions about your money.

The post Debt Hotspots Unveiled: Is Your State on the List? first appeared on Pulse365.

Featured Image Credit: Shutterstock / Artie Medvedev.

The content of this article is for informational purposes only and does not constitute or replace professional financial advice.

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