Special Report

States Where Debt Is Increasing the Most During COVID-19

At the height of COVID-19 pandemic, the nation’s unemployment rate soared to 15%, the Bureau of Labor Statistics reports. And the fallout on American workers was immediate as many lost their paychecks or saw their wages plummet overnight. So how did the pandemic and the ensuring lockdown hit Americans’ wallets? Was it as devastating as first predicted? 

The majority of Americans did feel a money crunch. But various surveys show mixed results. Partially because of government stimulus checks, extended unemployment benefits, and a more watchful eye on their spending, Americans appear to have weathered the economic turmoil fairly well — at least so far. 

On one hand, Americans rolled up more debt on credit cards to make up for lost income. Of the 2,400 adults who responded online to a Bankrate.com survey in September, 42% admitted their credit card balances have ballooned since the pandemic began in March 2020. Nearly half — 47% — said they used their credit cards because of the pandemic. See how many people in your state are burdened by credit card debt.

And there could be lasting fiscal impacts well after the pandemic ends. A Pew Research survey in January collected the responses from a sample of 11,000 Americans on their financial situation. Fifty-one percent of non-retired adults said the pandemic will make it harder for them to achieve their long-term financial goals. 

While Americans may have taken on more debt, they were mostly able to pay it off in a timely manner and avoid their debt ending up at the hands of a collection agency. 

According to the nonprofit think tank Urban Institute, most Americans shored up their bank accounts and kept their spending in check. The median amount of debt in collection nationwide rose a scant $16 between February and October 2020, inching up from $1,833 to $1,849. 

Though debt in collection increased slightly, the percentage of people with debt in collection actually declined — edging down from 29.68% to 29.1%, a drop of 0.58 percentage points. That belt-tightening helped Americans bolster their credit score. The median credit score increased by 11 points, from 693 to 704. 

Going state by state, median debt in collection climbed in 29 states, but median credit scores rose in all states. Median debt in collection declined the most in North Dakota, falling by $244 to $1,914. In the state where median debt in collection increased the most, it rose by $120 to $2,242. The amount of median debt in collection in October 2020 ranged from $1,315 to $2,509.

Nationwide, mortgage delinquency rate also fell, from 3.02% to 1.57%, a significant decline of 1.45 percentage points. The only state with a rise in mortgage delinquencies was Hawaii. Interestingly, Hawaii residents are the least likely to own their own homes in the nation — these are the states with highest homeownership.

To identify the states where debt in collection increased the most during COVID-19, 24/7 Wall St. ranked each state by the change in median debt in collection from February 2020 to October 2020 using data from Urban Institute’s “Credit Health During the COVID-19 Pandemic” report.

Additional information for each state includes figures for February 2020 and October 2020 for the share of people (with a credit bureau record) with any debt in collections; median credit score — median Vantage score (300 to 850) of people with a credit bureau record; and mortgage delinquency rate — the share of mortgage holders who are behind on their mortgage payments by 30 days or more. All data came from the Urban Institute report.

Click here to see the states where debt is increasing the most during COVID-19

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