Getting sent to collections and breaking a mirror reap the same negative effect — a seven year curse. That’s bad news for Texans, who, according to WalletHub, have the eighth highest rate of collection accounts in the country.
“Collection accounts stay on your credit report for seven years, even once they’re fully paid off, so it’s ideal to not get into this situation in the first place,” said Chip Lupo, a WalletHub analyst
A collection account is what happens when a debt is sold to a collection agency by the original creditor, often resulting in endless phone calls. WalletHub ran the data based on four key measures, including the average number of collection accounts and their balances, and ranked all 50 states.
Having a collection account on your credit report will further reduce your credit score and complicate large purchases. Paying off the balance can prevent your credit score from worsening, but the collection account will remain on your report. Debtors can reach settlements with collection agencies, create repayment plans or wait out the seven years.
“No matter what avenue you decide on, you should know your rights and protect yourself from harassment by debt collectors,” Lupo said.
The average Texan has 3.22 collection accounts, according to the study, and each account has a balance of $1,432.49. Wyoming has the most collection accounts of any state, and Mississippi has the least.
Another study from WalletHub, which assessed credit score and bankruptcy filings, found that Texas had the most people in financial stress of any state.
“Millions of Americans are having trouble making payments on their debts, which can lead to unsustainable interest, fees and credit score damage,” Lupo said.
Texas has one of the worst average credit scores in the country, 680. It doesn't sound like a terrible score, but it still lands 47th out of all 50 states. Despite Texas, and much of North Texas specifically, continuously being billed as an affordable place to live, Texans may not have the best money management skills. But it’s not our fault in the Big D, as this city is the hardest large city to build a savings account in, according to another recent study.
“Taken together, that means that Dallas homeowners tend to spend an outsize chunk of their earnings just paying off their homes," Josh Koebert, a researcher for Finance Buzz, told the Observer. "[That leaves] a lot less for them to spend on other expenses, in turn leaving even less that can be put into savings after that.”
