Missing a utilities bill or credit card payment happens more than we’d like to admit. Letters requesting payment can be tossed in the recycling bin, caller ID can make it easy to avoid phone calls, but the debt does not disappear. After a few months it may be sent on, or sold, to a collections agency for payment, leaving a derogatory mark on a credit report that may stay there for seven years or longer.
Young consumers are vulnerable to having accounts sent to collections agencies, in part due to a lack of credit education. According to Credit Karma’s recent Credit Fumble™ research, only 28 percent reported receiving any type of financial education before college.
This education gap means that collection accounts are a common problem for young consumers. In the Credit Fumble research and survey, 47 percent of people reported missing a payment on a credit card or loan before entering their 30s, while 44 percent of people surveyed said they had an account sent to a collections agency. According to data from Credit Karma’s more than 50 million members, an average 24-year old member has 1.87 accounts in collection.
To quantify where this problem is hitting young consumers the hardest in the US, Credit Karma looked at the top cities where 18-24 year old Credit Karma members have the most open collection accounts on average:
- Milwaukee, WI: 3.161759058
- Louisville, KY: 2.336561586
- Indianapolis, IN: 2.297978412
- Charlotte, NC: 2.202734375
- Greensboro, NC: 2.192027972
- St. Petersburg, FL: 1.997478568
- Las Vegas, NV: 1.969948014
- St. Louis, MO: 1.965696712
- Reno, NV: 1.965475099
- Birmingham, AL: 1.871525469
Alongside free credit scores and reports, Credit Karma offers its members friendly, personalized information to help each of them understand and make the most of their individual situation.
The data above looks at the average amount of open collection accounts for Credit Karma members between the ages of 18 and 24 who live in the 100 largest cities in the United States and pulled their credit report through Credit Karma in 2015. Credit Karma’s Credit Fumble research draws upon a survey of 1,051 Americans between the age of 31-44, done in partnership with Qualtrics in late 2015, about the struggles they had managing their finances before entering their thirties.