Debt appears to have become an overwhelming problem in the United States. However, total debt figures do not tell the story. Many Americans have done well financially during the COVID-19 pandemic. Some have benefited from the stock market. Others have made money, on paper, because of the increased value of their homes. Home equity loans have been popular during a period when home prices are rising. And government programs have given Americans billions of dollars in financial aid.
The recent Quarterly Report on Household Debt and Credit from the Federal Reserve Bank of New York’s Center for Microeconomic Data found that total household debt in America was $15.24 trillion. This compares to U.S. GDP of $20.9 trillion in 2020. The debt figure was up $2.57 trillion from 2008. The largest piece of the figure by far was mortgage debt at $10.67 trillion. Once again, the rise in home equity values may account for some of this borrowing.
In several cases, the debt picture did improve. From February to October 2020, mortgage delinquencies declined and credit scores increased. The share of people with debts in collection declined slightly, while the median amount of debt in collection increased by only $16, to $1,849, according to nonprofit think tank Urban Institute. Debt in collection occurs when a creditor, such as a credit card issuer, writes off the debt as a loss after a certain period of nonpayment, typically after 180 days, and sells it to a collection agency. The borrower’s credit score then tanks and the stressful calls from the collection agency begin.
To identify the county where debt in collection increased the most during COVID-19, 24/7 Wall St. ranked counties by the change in median debt in collection from February 2020 to October 2020 using data from the Urban Institute’s Credit Health During the COVID-19 Pandemic report.
Debt increased the most in Callahan County, Texas. Here are the details:
- Change in median debt in collection: $2,479
- Median debt in collection: $3,989 (first)
- People with debt in collection: 47.95% (204th)
- Median credit score: 652 (1,945th)
Only 2,225 counties with data were considered to identify the one where debt in collection increased the most during the pandemic. Additional information on each county included median debt in collection for October 2020; the share of people (with a credit bureau record) with any debt in collections in October; and the median credit score — median Vantage score (300 to 850) of people with a credit bureau record — in October. All data came from the Urban Institute report.