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35% of American Adults Have Debt 'In Collections'

Soulskill posted about 1 month ago | from the all-the-cool-kids-are-doing-it dept.

The Almighty Buck 570

New submitter meeotch writes: According to a new study by the Urban Institute, 35% of U.S. adults with a credit history (91% of the adult population of the U.S.) have debt "in collections" — a status generally not acquired until payments are at least 180 days past due. Debt problems seem to be worse in the South, with states hovering in the 40%+ range, while the Northeast has it better, at less than 30%. The study's authors claim their findings actually underrepresent low-income consumers, because "adults without a credit file are more likely to be financially disadvantaged."

Oddly, only 5% of adults have debt 30-180 days past due. This latter fact is partially accounted for by the fact that a broader range of debt can enter "in collections" status than "past due" status (e.g. parking tickets)... But also perhaps demonstrates that as one falls far enough along the debt spiral, escape becomes impossible. Particularly in the case of high-interest debt such as credit cards — the issuers of which cluster in states such as South Dakota, following a 1978 Supreme Court ruling that found that states' usury laws did not apply to banks headquartered in other states.

Even taking into account the folks who lost a parking ticket under their passenger seat, 35% is a pretty shocking number. Anyone have other theories why this number is so much higher than the 5% of people who are just "late"? How about some napkin math on the debt spiral?

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The American Dream (3, Insightful)

Anonymous Coward | about 1 month ago | (#47561711)

is a pyramid scheme.

Re:The American Dream (-1, Troll)

Karmashock (2415832) | about 1 month ago | (#47561943)

Its only eroded as socialism has advanced.

Re:The American Dream (5, Insightful)

Osgeld (1900440) | about 1 month ago | (#47562035)

its cute that you people can take a large and complex problem with many angles and reasons and boil it down to a simple catch phrase you heard on talk radio

Re:The American Dream (3, Insightful)

Noah Haders (3621429) | about 1 month ago | (#47562073)

Its only eroded as socialism has advanced.

socialism stepped in as the american dream eroded.

Re:The American Dream (-1)

Anonymous Coward | about 1 month ago | (#47562197)

the american dream was stupid and unsustainable socialism is a viable solution for an enlightened society.

Past due not reported by companies (5, Insightful)

brokenin2 (103006) | about 1 month ago | (#47561721)

One reason that I'm sure is a factor in the difference, is that companies are less inclined to bother reporting the "past due" status. It's overhead for them to do it, and there's not really any benefit, but when someone hits the collections threshold, they'll go ahead and take the time to report it.

looming American spring... (4, Insightful)

thieh (3654731) | about 1 month ago | (#47561725)

Given the trend of income inequality it would be no surprise of any sort of abrupt riots to the magnitudes of some civil rights leader got killed

Lies and statistics... (5, Interesting)

mythosaz (572040) | about 1 month ago | (#47561727)

This was discussed on Fatwallet today, and most of the sensationalism was debunked quickly.

http://www.fatwallet.com/forum... [fatwallet.com]

A few juicy tidbits:

More details: "An alarming 35 percent of people with credit files have debt in collections reported in these file s . This percentage is nearly identical to results from a 2004 analysis of credit bureau data by the Federal Reserve, which found that 36.5 percent of people with credit report s had debt in collections reported in their file s (Avery et al. 2004). Note that consumers themselves may not realize they have debt in collections. Some consumers report becoming aware of this debt only when they review their credit report (CFPB 2013)"

...and...

The actual source: http://www.urban.org/publicati... [urban.org]

Only 5.3% are currently past due on a bill. "5.3 percent of people with a credit file have a report of past due debt, indicating they are between 30 and 180 days late on a nonmortgage payment"

So most of the people have old debts which could be up to 7 years old.

So there you go. A lot of us have an outstanding medical bill on our credit reports, and we should check them more often.

Re:Lies and statistics... (1)

thieh (3654731) | about 1 month ago | (#47561745)

So there you go. A lot of us have an outstanding medical bill on our credit reports, and we should check them more often.

Will The Affordable Care Act implementation help?

Re:Lies and statistics... (2)

Enry (630) | about 1 month ago | (#47561875)

Yes, since the bills would be covered by insurance.

Re:Lies and statistics... (5, Interesting)

mythosaz (572040) | about 1 month ago | (#47561947)

I actually suspect that's a lot of people's 35%.

We've been fighting a small medical bill because the hospital couldn't bill insurance correctly. Bill trickle in after major events (doctors and other specialists bill separately, badly, incorrectly coded) and rarely are they all seamless. Even perfectly covered items might leave a hospital (or doctor, or...whatever) chasing you around the world for a co-pay. ...and knowing they'll rarely see it, they sell them for pennies on a dollar to debt collectors who'll ding your credit.

If my wife wasn't a benefits specialist in a previous life, we'd drown in the things - all so badly handled by incompetent billers and insurers.

Re:Lies and statistics... (1)

Enry (630) | about 1 month ago | (#47561977)

Probably, but with everyone covered with some level of insurance and getting rid of coverage limits should cut down on the number of people that are in collection for medical reasons.

Somewhat the opposite (2)

billstewart (78916) | about 1 month ago | (#47562193)

Yes, it's going to cut down on the number of people who are in collection for medium-large debts because they got medical services they couldn't afford at the time and haven't been able to pay off (either yet, or ever.)

But it's going to significantly increase the number of people who are in collection for small debts because doctors or insurers paid the wrong amount. I've got one doctor's office that usually doesn't charge me a copay, but after the insurance gets around to paying them, there's an amount of money left over that's within a dollar or so of the amount the copay would have been, so their medical group gets around to sending me a bill, and it's extremely difficult to keep track of which of those bills are actually correct and final or which ones are rolling totals of insurance confusion in progress. Usually those get straightened out after a while, but sometimes they've called me and there's $20 that's going to go to collection if I don't pay right away. There's an X-ray lab that has a negotiated rate with my insurance company that's a lot lower than their rack rate; I went to them one January, and insurance didn't pay them anything because I hadn't reached my deductible for the year yet, and the lab billed me the rack rate, not the negotiated rate (I paid them the correct amount, and explained why, and the rest eventually ended up in collection because they couldn't figure out how to deal with it.)

Re:Lies and statistics... (4, Insightful)

mythosaz (572040) | about 1 month ago | (#47562195)

I suspect most medical collections (by volume, not dollar) fall into unpaid copays, and miscoded bills that are never correctly sent to insurance.

I suspect most medical collections by dollar are catastrophic issues of some sort. Hospitalization for uninsured or underinsured.

Re:Lies and statistics... (1)

Enry (630) | about 1 month ago | (#47562255)

I'll grant you that very well may be the case. Removing copays for regular checkups and vaccinations should help a bit, and it should be incumbent on the doctor's office to collect the copay at the time service is provided (in most cases, ER is different). The doctors for my family do that and there's never been a problem.

If the concern is the amount of money that is in collection rather than the number of outstanding collections, then having an insured population will help (or at least cut the amount from tens or hundreds of thousands down to whatever the deductible is).

Re:Lies and statistics... (1)

sumdumass (711423) | about 1 month ago | (#47562225)

I don't think you understand what he was talking about.

It isn't a matter of no insurance or inability to pay that he describes, it is a matter of something not being billed correctly or coming in later and being missed by the insurance payments (as well as you needing to pay your portion too). So you go through life thinking everything has been taken care of and review your credit report because you are thinking of some major purchase (car, home, RV- whatever) and discover that you have a bill in collections.

You see, this would be in spite of having insurance.

Re:Lies and statistics... (0)

Anonymous Coward | about 1 month ago | (#47561957)

Except for the 20% of that multimillion dollar cancer treatment that you're on the hook for (not that coinsurance is ACA's fault)

Re:Lies and statistics... (1)

MightyYar (622222) | about 1 month ago | (#47562025)

Perhaps, but the deductibles on the low-end plans are quite high - around 5 grand on average.

Re:Lies and statistics... (1)

Enry (630) | about 1 month ago | (#47562211)

It's better than going $100,000 in debt.

Re:Lies and statistics... (2)

MightyYar (622222) | about 1 month ago | (#47562257)

Absolutely! I'm not dinging the idea of having insurance, and I'm not even criticizing the deductibles - that's the smart way to save for the vast majority of people.

I'm just pointing out that it is pretty easy to not have $5000 to pay medical bills.

Re:Lies and statistics... (5, Insightful)

Shakrai (717556) | about 1 month ago | (#47562169)

Yes, since the bills would be covered by insurance.

After the deductibles and co-pays. I have a "platinum" plan through my employer; better insurance than anyone else I know and the co-pays still total up to a considerable amount. No deductibles for in-network on my plan, which makes me extremely fortunate. As a single guy I can afford the co-pays even with my modest salary but I can see how quickly they would bankrupt someone with a family, particularly if said family had one or more members with a chronic illness.

Incidentally, I was just exposed to rabies a few months ago:

Strike One: The only place to get the immunoglobulin is the ER, because it's very expensive (>$4,500) and has a short shelf-life. ER co-pay: $150
Strike Two: There's a set schedule for the vaccine, Days 0, 3, 7, and 14. You can get the vaccine from your primary, in theory, but of course my primary has a months long waiting list because we're driving PCPs out of business. Bottom line, I can't get appointments with them for Days 3 or 7, so that's two more trips to the ER. Additional co-pay total: $300
Strike Three: New York State ostensibly has a fund to pay for out of pocket expenses related to rabies exposures, but they only reimburse for the rabies vaccine and immunoglobulin. Since the ER decided to give me a tetanus shot on Day 0 NYS won't reimburse me, even though my out of pocket would have been $150 with or without this extra shot. Hooray for bureaucracy!

Totaling all this up, that stupid bat that found its way into my apartment has personally cost me $465 ($450 of ER co-pays, $15 of PCP co-pay) while my insurance company is on the hook for close to $7,000. My annual premium is about $6,000. So this one incident wiped out every penny they made on me and then some. I'm an otherwise healthy 32 year old marathon runner that ought to be subsidizing those who are less fortunate. Now imagine a family of four that were all exposed to the same scenario I was.....

Re:Lies and statistics... (1)

mythosaz (572040) | about 1 month ago | (#47562209)

In a past life, I was fortunate to work for a large west-coast healthcare company.

The largest deductible I had in-network was $100 for surgery, and $75 for ER trips. I had to use said west-coast healthcare facilities if there was one within 50 miles of me, but we were pretty good hospitals, so I never minded.

Re:Lies and statistics... (0)

Anonymous Coward | about 1 month ago | (#47562261)

There's a set schedule for the vaccine, Days 0, 3, 7, and 14. You can get the vaccine from your primary, in theory, but of course my primary has a months long waiting list because we're driving PCPs out of business. Bottom line, I can't get appointments with them for Days 3 or 7, so that's two more trips to the ER.

That's really bad.

PBS [pbs.org] and Reuters [reuters.com] have articles on a push to support primary care doctors.

From the second article, "The insurer can afford that because better primary care, which accounts for just 6 percent of all medical spending, can reduce hospitalizations and visits to expensive specialists." I hope the idea catches on.

Re:Lies and statistics... (5, Interesting)

Austerity Empowers (669817) | about 1 month ago | (#47561881)

The medical thing is important, more than once I've been told my debt is being sent to collections because the hospital and insurance were bickering over who pays what. My wife and I have adopted a policy of not paying until at least 6 months later, or after those two sort it out, since you can never get your money BACK once sent, but until they settle it out there's no way to know what is owed. There has also been a case where something was on my bill to the hospital that was not a rendered service, and having disputed it endlessly, the hospital would still not relent that my 6 yo son had required a breast pump for his treatment.

I've also heard of, particularly gym memberships, being sent to collections because the company had constructed a labyrinth of obstacles to cancelling membership (e.g. Gold's Gym). So people would simply stop paying, and ultimately be sent to collections for non-payment of a service they didn't use. I suspect this form of collections will be on the rise, as the growing trend of writing mandatory recurring payments into contracts increases. I fully support anyone who cancels such things de facto (as long as they actually stop using the service), it's a horrible practice.

Re:Lies and statistics... (1)

Noah Haders (3621429) | about 1 month ago | (#47562095)

My wife and I have adopted a policy of not paying until at least 6 months later, or after those two sort it out, since you can never get your money BACK once sent, but until they settle it out there's no way to know what is owed.

I have a similar policy, to never pay the first bill. if it is still outstanding after a few more weeks they'll bill you again.

Re:Lies and statistics... (1)

hsmith (818216) | about 1 month ago | (#47562109)

Golds is a cancer. I was a member there for awhile. For whatever reason, they stopped charging my credit card. I was looking over my bills and noticed they hadn't billed me for 3 months. Contacted the gym and fixed the CC. A week later, a call from collections for non-payment. No one ever contacted me. The CC was fine, hadn't expired. Because of an internal problem, they sent me to collections. Insanity.

Re:Lies and statistics... (3, Interesting)

jxander (2605655) | about 1 month ago | (#47562281)

Same thing happened to me with my ISP, Cox. The bank has no record of any canceled, refused, returned, failed, or otherwise erroneous attempted payments. As best I can tell, Cox just decided to stop my automatic monthly payments for no adequate reason.

Luckily (luckily?) they just cut off my service before it went to collections. I called them up and payed the bill, but now face a different problem. They've blocked auto-payments by credit card, to include the automated phone system. I have to either mail out a physical check, or call them up every month, wait on hold for an hour or so, and fight with the phone rep to not charge the $10 service fee for speaking with a phone rep. Once they've canceled the bonus charge, I can just say, "Pay with the card on file" and that's fine. Till next month, when we do the dance all over again

Gotta love a monopoly.

Re:Lies and statistics... (2)

MightyYar (622222) | about 1 month ago | (#47562115)

the hospital would still not relent that my 6 yo son had required a breast pump for his treatment.

We had a similar love triangle going on between our pediatrician, the lab, and the insurance company. The doctor mistakenly ordered some kind of experimental genetic autism blood test for my son who was having digestive problems. The insurance company obviously refused to pay, and the lab wanted the money. The doctor ended up eating it, but had we paid the bill it would not have ended well for us! :)

I fully support anyone who cancels such things de facto (as long as they actually stop using the service), it's a horrible practice.

I have two blemishes on my credit report. The first is from the local newspaper (the Philly Inquirer), who gave me 60 days of free service and then kept on delivering the stupid paper after the 60 days. I had moved, and went by the now-empty house a few times to pick up the mess of papers stacked about a foot or two high (a friend was trying to sell it). Ultimately, they referred me to a collection agency. Yeah, good luck with that!

The other was a parking ticket from the City of Brotherly Love. They dinged me for staying too long in a 2-hour spot, even though I was in the middle of a move and I was just loading the vehicle for 20 minutes at a time and then returning to the same spot to load back up an hour or so later. Since I was moving out of state and selling my car, I figured I'd stiff them. They seem to have given up, though they put up a good fight - even tracking down my parents at one point! All for $25. It probably didn't help that I would tape a penny to the payment slip and send it back.

My credit is still north of 800 (according to my Discover Card statement) so I'm not really troubled.

Also maybe you got in a fight with a company (1)

Sycraft-fu (314770) | about 1 month ago | (#47561915)

Fedex sent me to collections for a debt I didn't owe. Now I was very feisty with it and made sure to check that it didn't go on my credit history, but many people wouldn't. It was only $20. So maybe they just ignore it, it gets on the credit record. That would be "in debt collections" but wouldn't really reflect on the rest of my finances, it would just be something I decided to quit fighting.

There's a difference between someone with a small debt in collections because they don't agree they owe it and someone with a bunch in collections because they truly are financially underwater.

I can see how easy to miss a medical bill. (0)

Anonymous Coward | about 1 month ago | (#47562021)

Went to a hospital for treatment. Hospital got my recently changed address-- which didn't get forwarded to the doctor doing the treatment. Got and paid the bill from the hospital. The doctor bill went to the old address-- which also don't get forwarded.

Only found out about the bill when the collection agency did the research, found my phone number and called. Got that bill paid once I found out...

Not surprised. (3, Insightful)

gatfirls (1315141) | about 1 month ago | (#47561743)

Once you have something go into collections it is always there until you pay it. (medical bills/school debt probably drives a lot of this)

You're only 30-90 days lat for a short period.

"Many consumers were burned for relatively small amounts -- about 10 percent of the debts were smaller than $125, Ratcliffe says"

This kind of thing probably drives the numbers way up too. That late fee from blockbuster, etc.

Re:Not surprised. (5, Interesting)

anagama (611277) | about 1 month ago | (#47561845)

I have a "debt" in collections right now. Comcast claims I owe $95 to them. Last winter I moved to a place where I could not only get other service, Comcast doesn't even serve (thankfully). So I told Comcast I'd be terminating my service effective Jan 15. Comcast had my credit card to auto-bill for it's "service".

Then in March I started getting collection calls from companies Comcast hired to get this from me. Nobody will prove to me that I actually owe this money. And what's odd is the amount: $95 when my monthly bill for internet-only service was about $60 or $70. I just got another call yesterday on it.

I could easily pay it and never even feel the hit. But fuck that! Comcast sucks beyond the ability of science to measure and I'm so sick of being taken by them, they're going to have to take me into small claims court and get a court order for this sum.

And yeah, I get that this will harm my sterling credit rating, but what a great means of extortion. Bill people small amounts under the threat of losing their good credit rating and even when people don't actually owe the money, they'll pay up to save their rating.

Re:Not surprised. (3, Informative)

mythosaz (572040) | about 1 month ago | (#47561999)

I don't know why anyone has more than a couple quick interactions with a debt collector.

A flowchart for 'ya.

http://creditboards.com/forums... [creditboards.com]

Re:Not surprised. (1)

gatfirls (1315141) | about 1 month ago | (#47562249)

See above, basically if a company "verifies" the debt you are boned without getting the courts involved.

Re:Not surprised. (0)

Anonymous Coward | about 1 month ago | (#47562027)

I had a similar problem with Americast a few years back. I was laid off work and would be living off savings for a time, so no need to pay for things like cable tv since I'd be spending that time job hunting.

My debt is significantly higher than the three months they claim I owed them, but assumed they had ways to add interest on top of the contract interest and fees.

Fast forward 5 years and I'm currently in a never ending cycle of debt collection companies calling and harassing me, going through multiple calls to get them to show any paperwork for this debt which they never can, and anywhere from right away to months later they go quiet for a week or two until the process starts over from scratch from another debt collection company that bought the debt from the former.

I've had three in as many years sue me in small claims and not one ever showed up (despite the cost and inconvenience of me doing so ready to have a judge end things once and for all)

The worst part is apparently my only two options are filing bankruptcy, or suing Americast directly, however they aren't in business anymore and its a legal firm that owns the assets now (which sounds like a bad idea to sue to me since I can't really afford a lawyer)

Americast management seriously deserves a nice long painful agonizing 50 year prison sentence for the massive frauds they have committed and the lives they are ruining even from the grave.

ditto (1)

hurfy (735314) | about 1 month ago | (#47562191)

Presumably mine has fallen off everything finally. Sprint* chased after an ETF fee on a month to month account for 10 years from the 90's.

*Only people to ever actually ask for it OR report it were the collection agencies NOT Sprint as they probably knew they were unlikely to get it. They should all be dismantled. Make one prove you owe the debt per the rules and they just sell to another when they can't. Rinse and repeat until you eventually miss the 30-day or whatever window for something :/

I'd have actually felt sorry for the 1st collection company as Sprint didn't disclose the dispute status if they hadn't sold it on to someone else. They admitted they weren't having much luck on some of their latest collections...mine wasn't they only bad one by far.

Re:Not surprised. (1)

sshir (623215) | about 1 month ago | (#47562213)

Ha!

Happened to me too! Had to call Comcast several times until got through drones to a supervisor. He confirmed that account was properly closed, said "what's the fuck?" and faxed me a letter to send to collectors. Also, it seems, he did something on his side too - issue got resolved without any blemishes to my credit history.

Re:Not surprised. (1)

gatfirls (1315141) | about 1 month ago | (#47562239)

I had a like problem with AT&T long ago. I had proof of payment and spent months trying to resolve it but they were basically like "f you pay me". It went to collections and basically the same run around. Years later I was buying a house and ended up paying the friggin thing because I had a short window and really no recourse other than taking them to court.

Re:Not surprised. (1)

thegarbz (1787294) | about 1 month ago | (#47561919)

I wonder how many of these are due to incorrect details. I've been living at my house for over 5 years now and I'm still getting letters from a debt collector for the previous tenant.
Apparently he owes $75. Apparently the debt collection has "confirmed the address as correct" and take immediate action if it's not paid.

I wonder with whom they confirmed the address. Certainly not with the people living there.

Re:Not surprised. (1)

gatfirls (1315141) | about 1 month ago | (#47562263)

They're probably valid debts and I imagine that's how a lot of people end up in this study. They moved and lazy billing/collections just fire out to whatever address they have and the person is unaware the debt exists until they try to go buy a car or something.

Re:Not surprised. (1)

romco (61131) | about 1 month ago | (#47561979)

>Once you have something go into collections it is always there until you pay it.

It can stay on your report for up to 7 years AFTER you pay it. Sometimes with an old debt paying it will hurt your credit more than it will help. It is possible to get a medical debt off after you pay it but it requires time and effort on your part.

Re:Not surprised. (2)

MightyYar (622222) | about 1 month ago | (#47562183)

Once you have something go into collections it is always there until you pay it. ... You're only 30-90 days lat for a short period.

You nailed it! Behold, math!

Collections stay on your credit report for 7 years, so long-term collections will be on there for 2377 days vs 180-30 = 150 days.

So you have 0.35/2377 < 0.05/150. Much less than. This is what you would intuitively expect.

People are thieves (-1)

Anonymous Coward | about 1 month ago | (#47561751)

It's not surprising 35% have been caught stealing.

how slashdot works (0)

Anonymous Coward | about 1 month ago | (#47561763)

1) find popular stories of the day on other news sites
2) copy and summarize to slashdot
3) ????
4) (Hopefully) profit!!

Re:how slashdot works (1)

Immerman (2627577) | about 1 month ago | (#47562231)

Slashdot and every other news-aggregation site on the web. At least Slashdot has nice forums that are conductive to interesting conversations (at least provided you don't get shunted to Beta)

So! The game is rigged! (5, Insightful)

s.petry (762400) | about 1 month ago | (#47561767)

The whole point of a "credit score" is horribly broken. In order to get approved for debt, you must have debt. If you have money in the bank and no monthly debt payments you have a reduced score. It's a SCAM! A scheme to make sure that you are constantly in debt, and yet it's perfectly legal. Living in debt constantly costs you money, and for what? So that you can have more debt? Wow!

The fact that people don't get this, or simply don't care, is very telling.

Personally I have almost no debt, just my car payment. I don't have a lot of debt so have a laughably low credit score. If I don't have cash I can wait to buy something. Actually since I manage my personal finances very well purchasing something I want is never an issue.

Re:So! The game is rigged! (1)

alen (225700) | about 1 month ago | (#47561825)

get a credit card and charge $100 a month and pay it off. or charge your living expenses and pay it off
simple

You needn't charge anything (1)

Sycraft-fu (314770) | about 1 month ago | (#47561961)

Just having one is sufficient. If you owe nothing on it, each month it'll be marked as "pays as agreed" on your credit report. Also it shows up as unused credit, which helps your score. Getting one and not using it works just fine. Having more than one and not using it works even better.

Re:You needn't charge anything (3, Interesting)

rmdingler (1955220) | about 1 month ago | (#47562121)

Father here.

Just accompanied my son to a credit union to begin to build his credit with a secured card... he wants a newer vehicle, has saved well, and was able to transfer the necessary security from his account with the financial institution for his pending secured credit line.

His loan officer told him his credit score would reflect more positively if he used only about 60% of his available credit line each month, and left 15 or 20 dollars per month in carryover balance, instead of paying off the entire balance each month.

Truth or bullshit?

Re:You needn't charge anything (1)

mythosaz (572040) | about 1 month ago | (#47562227)

...having one is sufficient, until that one cancels you for never using it.

You'll get a good credit report either way short term, but make sure to do something to keep your account from being closed due to inactivity.

Re:So! The game is rigged! (5, Informative)

Obfuscant (592200) | about 1 month ago | (#47561849)

In order to get approved for debt, you must have debt.

No, to get approved for debt you need one of two things:

1. A credit history. That's not necessarily debt, it is a history of handling small debts that you've paid off.

2. Belong to a demographic that the credit companies are chasing.

When I was in college, the stores were deluging me with offers of credit cards because of my age/college while the credit union followed rule 1 and repeatedly denied me a credit card. In recent years, the largest flood of credit card offers were when I had no debt at all, but had a paid-off car loan.

It's a SCAM! A scheme to make sure that you are constantly in debt,

Nobody can force you to go into debt.

Re:So! The game is rigged! (0)

Anonymous Coward | about 1 month ago | (#47562017)

I don't get that either.
I pay for everything cash, so I have a low credit score.
How the fuck does that work?
I paid for my car cash, I pay my rent cash, I pay the cable company cash.
I have over $30k in the bank and I have monthly paychecks.
So I should have a much higher credit rating than someone who is constantly paying with credit cards in my opinion.
I wouldn't even mind so much, except that when renting a house they do a background check, and they expect to find a credit history, which I don't have.

Re:So! The game is rigged! (5, Insightful)

vux984 (928602) | about 1 month ago | (#47562177)

I pay for everything cash, so I have a low credit score. How the fuck does that work?

Sure, you might be independantly wealthy and just buy everything with cash... or maybe you live day to day off the money you make turning in aluminum cans. In other words, your score is low because they can't tell you from hobo.

I paid for my car cash, I pay my rent cash, I pay the cable company cash.
I have over $30k in the bank and I have monthly paychecks.

None of which is reported to a credit scoring agency.

So I should have a much higher credit rating than someone who is constantly paying with credit cards in my opinion.

You are probably more credit worthy, and probably deserve a higher score, but you aren't playing the game to get one.

I wouldn't even mind so much, except that when renting a house they do a background check, and they expect to find a credit history, which I don't have.

So get one. Apply for a card, buy some stuff you were planning to buy anyway, pay it off... costs you NOTHING. And you get a higher score on the credit rating game, for when you need it.

Re:So! The game is rigged! (2)

HangingChad (677530) | about 1 month ago | (#47562153)

Personally I have almost no debt, just my car payment.

We opted out the debt economy years ago. We froze our credit reports and paid cash for our last house, car and motorcycle. We could have some dinky medical bill or something that slipped through the cracks in collections and not even know it. We might not even find out about it until we update our address when the credit freezes expire and we need to renew them.

You don't need credit cards, car loans, or mortgages. We're living proof. We fly, stay at hotels, rent cars all the things people think they need credit to do. We don't pay more for car insurance, though we do have the occasional utility deposit.

Nothing you can buy with credit feels as good as opting out of the debt economy.

Re:So! The game is rigged! (1)

Holistic Missile (976980) | about 1 month ago | (#47562187)

There is some truth to this. I have lived essentially debt-free for 10 years now. I have a few credit cards with no balance on them, and occasionally will finance a car, which gets paid off in 50-60% of the term of the loan.

Over this time, all other things have been equal with my credit history, but each time I take out an installment loan, my FICO score goes up 20 - 30 points over 3-4 months. Once the loan is paid off, it drops down again over about a year.

I bought a new motorcycle over the winter, and financed part of it. FICO score is on the rise again! But in a year, it will be falling again, as the loan will be paid off.

Also, a few years ago, during the rash of bank bailouts, I had several credit cards cancelled for 'lack of activity'. I'm sure it was the banks trying to improve their balance sheets to make it look like they did something with the bailout money other than steal it.

Re:So! The game is rigged! (3, Interesting)

Loki_1929 (550940) | about 1 month ago | (#47562201)

The whole point of a "credit score" is horribly broken.

The idea isn't bad. The implementation is okay, though it can be gamed to some degree. The biggest issue most people actually have with it comes down to a serious lack of financial education. It isn't the easiest or most intuitive system; it's the one that's worked well for a long time thanks to a lot of trial and error.

In order to get approved for debt, you must have debt.

Now that's just untrue. If it were true, you'd have a chicken and egg problem with debt. The reality is that certain types of credit/debt (e.g. student loans) don't care whether you have other credit/debts or not. Some types of credit/debt (e.g. credit cards) are rate-sensitive to whether you've demonstrated - through your behavior with previous credit/debts - the likelihood that you'll stick to the terms of the new credit vehicle. Some types of credit/debt (e.g. a mortgage) are much more difficult to get at all without a demonstrated ability to manage credit/debt responsibly. That's due to the fact that different types of credit have different risk profiles. A credit card company can set a ceiling on how much the issuer can lose if you're a high or unknown risk. When it comes to a mortgage, you're talking about tying yourself to the borrower for a very long time with an asset that could tank in value anywhere during that time. Since student loans survive everything up to and including the end of the world, they're easy to get.

If you have money in the bank and no monthly debt payments you have a reduced score.

The first part is another myth. The amount of money you have in the bank means absolutely zero to a FICO score. It means something to a mortgage company, but that's it. FICO scores are completely unaffected by money in the bank. The second is somewhat true, depending on circumstances. Cracking 800 is going to be very tough without some sort of installment loan (vehicle or mortgage). That said, you can hit top-tier rate scores (740+, even 760+) without either of those. You can have credit cards you pay off every single month and hit the scores you need to secure the best available rates. No debt required. It's just tougher.

It's a SCAM! A scheme to make sure that you are constantly in debt, and yet it's perfectly legal.

Wait, what? People with the highest FICO scores typically have little to no debt, aside from perhaps a mortgage, maybe a car loan. It's rare that they'll have any serious credit card debt or other revolving accounts with any substantial balances. In fact, having substantial balances on your revolving credit accounts hurts your score. The point isn't to keep anyone in debt, it's to provide a score that tells potential lenders how likely it is that an individual they've never met before will stick to the terms of their agreement if they're granted credit.

I don't have a lot of debt so have a laughably low credit score.

If your credit score is "laughably low", it isn't because you don't have enough debt. In reality, what drives your score is 5 simple things. The largest component is payment history. Don't pay back debts? Bad history, bad score. A perfect score here is no delinquencies or bankruptcies. Any accounts listed should be "paid as agreed" or something to that effect. If you have no debts, pay your utilities and medical bills (things that report delinquencies to the credit reporting companies), and pay that car loan on time, you should have a perfect score here. The second is the balance of all your revolving accounts. No balances on credit cards? Low balances relative to total available credit? Perfect or near perfect score. That's 65% of the total score right there. More info here: http://www.myfico.com/credited... [myfico.com] (bank balance isn't listed because it doesn't apply).

If I don't have cash I can wait to buy something. Actually since I manage my personal finances very well purchasing something I want is never an issue.

Well, except that car. Someone apparently ponied up the cash to pay for that for you. Not saying that's bad, but I think you can drop the pretentious hipster anti-credit attitude seeing as you admit it's actually a necessity for big ticket items.

Re:So! The game is rigged! (2)

MightyYar (622222) | about 1 month ago | (#47562221)

It's a SCAM!

It's not a scam, but you do have to look at who the score is for. It is not for you, it is for lenders. They want to know how good of a risk you are, and to establish that you need a track record. It is trivial to maintain a good track record - simply use a credit card and pay it off. It will cost you nothing, or even make you money if you game the system like those Fatwallet acolytes.

I dont know a single one! (0)

peter303 (12292) | about 1 month ago | (#47561773)

Not something relatives or acquaintances brag about I suppose.

What are the odds of this happening if I know 400 people and zero out of 35%? Must be at least 6-sigma!

Re:I dont know a single one! (1)

praxis (19962) | about 1 month ago | (#47561877)

Not something relatives or acquaintances brag about I suppose.

What are the odds of this happening if I know 400 people and zero out of 35%? Must be at least 6-sigma!

The fact that you know 400 people's finances intimately (possibly even better than them since many people don't know everything on their credit report) is far more impressive than you not knowing anyone who has a debt in collections.

Not saying what you say is false, just impressive.

The Rich got Richer over the past 30 years (3, Insightful)

WillAffleckUW (858324) | about 1 month ago | (#47561785)

The Middle Class didn't.

The Poor got taken to the cleaners.

Thank god my investments in Guillotine and Pitchfork franchises are proving to be fruitful.

I'm probably one of them (2)

Snotnose (212196) | about 1 month ago | (#47561811)

2-3 months ago I got a notice from the State (CA) collection agency stating I owed them $200 from 2007, along with warnings they could garnish my salary, garnish an incomtax refund, take my firstborn, etc. First I've heard of it. They have a number to call to ask questions. Half the time the phone isn't answered, the other half I leave voicemail that is never returned. So I'm prolly in collections, along with the credit ding, for a 7 year debt I knew nothing about and can't get any information on.

I'm about to spend the money for a registered letter to ask WTF, but I'll bet they don't respond to it.

Farking asshats.

Re:I'm probably one of them (1)

taustin (171655) | about 1 month ago | (#47561911)

How certain are you that it actually from the state collection agency? It fits the pattern of a common form of fraud.

Re:I'm probably one of them (1)

Snotnose (212196) | about 1 month ago | (#47562223)

The default notice lists a website that is in ca.gov, and it has the same info in the notice. I'm 100% sure it's not a scam. Well, it sounds like a scam from california, but not from Nigerians.

Re:I'm probably one of them (0)

Anonymous Coward | about 1 month ago | (#47561917)

IIRC, 7 years is the amount of time it takes for bad ratings to no longer be considered in your credit report. They may just be getting desperate since it's about to go away forever. Also consider that more than a few collections companies call themselves 'State Foobar Collection Agency' and then reveal that they're not associated with any government agency in 0.0001-point font.

Re:I'm probably one of them (1)

Anonymous Coward | about 1 month ago | (#47561973)

I know I have several thousand dollar of debt out there. Credit cards and then graduation and trying to find a job after moving. Had no billing address to route things to. Tried to call card companies a few months later but it was too late and everything had gone to collections by four months. Called the collections people and offered to make payments, but they wouldn't accept anything but full payment (which I by no means had in any form) and I suppose they had forgot who had called who got abusive, so I just hung up. Pretty much never heard back anything again. I did get a letter in the mail to me from some collections agency saying I owed money and about what I expected to owe on one of these credit cards. I paid it. I even got back something that said it was paid. I realized that there was no information saying which card it was. Next time I got something like that in the mail, I looked it over and again there is no information there about which card it might be related to. From there on I considered it a scam. If this many people really do have that much in collections, then it's a neat scam. Just spam people with snail mail for money they owe and see what comes back.

Re:I'm probably one of them (1)

labnet (457441) | about 1 month ago | (#47562065)

I had a debt collection agency come after our business for $100 unpaid cell phone bill.
It was from a lone disused cell phone where we had either never received the invoice or admin had misplaced it.
I said no problems, just give me a copy of the invoice and we'll pay up.
They said. Can't do that.
To cut a long story short, the phone company sells anything past due date to a collection agency BUT doesn't bother to give them the supporting documentation.
How retarded is that!

Re:I'm probably one of them (1)

jxander (2605655) | about 1 month ago | (#47562217)

Similar. Just a week ago I received notice from a collection agency that claims I owe $100 to a Car Insurance company.

I'm not a customer that company, and haven't been a customer of theirs in nearly a decade, and this is the first I've heard of it. So you can likely count me amongst the 35%. My attempts to clear up the confusion have been equally fruitless. Just a lot of "I don't know why you're just now finding out. I can't remove the debt. You'd better just pay it."

i blame my kids (0)

alen (225700) | about 1 month ago | (#47561815)

i have to pay day care for one kid and after school for another
add mortgage, HOA dues, taxes, food, car, mass transit and some other expenses
when school is out you have to pay for camp which in NYC for most people is like $4000 for the summer, although i got a deal MUCH CHEAPER
for a lot of people they also pay for tutoring for their kids or test prep

sometimes you have to use the credit card instead of paying cash and sometimes you have to juggle bills

Re:i blame my kids (0)

Anonymous Coward | about 1 month ago | (#47561941)

when school is out you have to pay for camp

Why? Will you be arrested for camp truency if you don't?

Re:i blame my kids (1)

alen (225700) | about 1 month ago | (#47562205)

some of use have to go to work and you can't leave 6 year old alone

Re:i blame my kids (0)

Anonymous Coward | about 1 month ago | (#47561967)

Haha, nice one! That really does sum up the typical New Yorker who should move out of the city.

Re:i blame my kids (4, Insightful)

TheGavster (774657) | about 1 month ago | (#47561981)

Children are simultaneously the most expensive and least liquid luxury you can get. If it's hard to make ends meet, maybe you should have gotten something more sensible and resalable, like a boat.

Re:i blame my kids (3, Insightful)

Snotnose (212196) | about 1 month ago | (#47562235)

Children are something like 80% water. Sounds pretty liquid to me.

Re:i blame my kids (0)

Anonymous Coward | about 1 month ago | (#47562039)

I blame you and your bad family planning.

mod do3n (-1)

Anonymous Coward | about 1 month ago | (#47561819)

opinion in other clearly become members aal over And sold in the 3orking on various would mar BSD's notwithstanding, that they sideline myself. This isn't

Comcast/Verizon/etc? (1)

MasterRa (655503) | about 1 month ago | (#47561847)

What about last-bills from phone companies, or cable companies, etc? I have debt that is "in collections" with both Comcast and Verizon. And it'll be a cold day in hell before they get another dime out of me. It's only like $100 each, but fuck them and fuck their bullshit. I wonder what % of this are people like me?

More proof that (1)

Anonymous Coward | about 1 month ago | (#47561859)

Over 1/4th of Americans are retards.

columbia house (1)

moke (574418) | about 1 month ago | (#47561865)

I did the buy 8 get 8 free CD's deal from columbia house in the 1990's... but then I only bought 7 CD's after getting the 8 free. There is a collection agency still chasing me for $15 20 years later.

Re: columbia house (0)

Anonymous Coward | about 1 month ago | (#47561927)

That's kind of awesome.

Re:columbia house (1)

mythosaz (572040) | about 1 month ago | (#47562029)

I'm going to go out on a limb and say you're over the statue of limitations on that...

Re:columbia house (0)

Anonymous Coward | about 1 month ago | (#47562049)

it leaves your credit report 7 years after the debt incurred, so somehow I think you are full of shit

my perspective (0)

Anonymous Coward | about 1 month ago | (#47561897)

in college i literally lived on ramen and did not have "the best" college experience but i made my way into a successful career. conversely i know college students who lived it up, went away for every spring break (because come on, you just *have* to!), here i wondered how on earth could they afford it!? then a few years later they filed for bankruptcy.

all paid for by (other) taxpayers. nice!

it's amazing, really.

Re: my perspective (0)

Anonymous Coward | about 1 month ago | (#47562015)

Nope, paid for via interest which they paid and others paid.

Never forget the "Fuck It" option. (0)

Anonymous Coward | about 1 month ago | (#47561903)

Unsecured debt may often be ignored when times are tight. I've a fair number of friends who have done that.

Because collections agencies do not accept fault. (1)

CODiNE (27417) | about 1 month ago | (#47561923)

Twice I've had problems with phone companies making a billing mistake, working it out with me over the phone, waiving it from my bill and THEN selling it to a collections agency.

They're double-dipping it as a write-off AND making back 10% or whatever they sell it for.

I have excellent credit and pay my bills on time, but nothing can convince a collection agency that they were sold bad debt. Why would they ever listen to or trust the person they're hassling? Not like they care anyways, say they know I'm right, why would they stop bothering me when they can hassle family and shame me into paying a debt I don't owe? It's extortion.

They Want you in Collections (4, Insightful)

zakkudo (2638939) | about 1 month ago | (#47561931)

The simple fact of the matter is, if you are in collections, most companies get the ability to rape you. They will be as harsh as possible when talking to you so that you don't want to negotiate. This equals more money in interest.

Student loans threatened me into work I couldn't physically do, and was relying on medicaid to keep my fake leg working. The threats forced my work over what I could do and pushed me into homelessness for a time.

I tried calling the collectors with the last of my money and all they could do is tell me to pay $14,000 in student loans in 3 monthes. Despite their threats causing me $100k in medical bills, multiple suicide attempts, and lost work time.

Since I have stabalized financially and I have been talking to them more, you soon realize the system was made to rape you from the beginning. It's a lot easier to face when you realize you aren't necessarily the evil one.

You can ask specific questions, but the department of education will refuse to give any specifics. The best I had gotten was a letter that read, "We have investigated your claims [what was investigated specifically was not stated], and we have found no issues. We have no departments that can handle this matter and if you would like to pursuie this it will have to be through litigation."

This is the US of A. I'll hang myself at a college before
I'm threatened into [work I can't do] -> [homelessness]. I'll do my best, but when the interest is $700 a month, you know the company you were working with had no serious intension of helping to pay back any dept, but only to cause you new ones.

Re:They Want you in Collections (1)

Nidi62 (1525137) | about 1 month ago | (#47562133)

You do realize for student loans (you went federal and not private I assume, right?) there are income-based repayment plans. For the next year I only have to pay $32 a month because I am only making about 27k for the year. There's no reason you should be paying $700 a month if you can't afford it.

Comcast (0)

Anonymous Coward | about 1 month ago | (#47561937)

I've heard a lot of people rack up weird charges when moving/switching internet/cable providers, unreturned equipment, final charges etc. The customers are often completely unaware that they were charged or owe anything and don't discover it until they check their credit reports years later.

Some American companies are idiots (0)

Anonymous Coward | about 1 month ago | (#47561949)

I had gene testing for cystic fibrosis at Georgetown during my wife's pregnancy. A year later I had not seen a charge on my insurance and had already moved to another location. The testing was done by a 3rd party who was also supposed to send the insurance claim. After calling the hospital many times no one could tell me the name of the company or even had a clue what I was talking about. No one replied to e-mails. Of course, around 1.5 years after the test it shows up on my credit report.

A similar incident happened with a dentist. They sent me a bill a few weeks later, but apparently there was still $15 they forgot to include on the initial bill. They send me another bill more than 6 months later and at that point I was living in a new place and never got it and never knew to expect it. About a year later it ends up on my credit report. That dentist actually had my phone number, but they never bothered to call...

For some reason many many people I know have had similar experiences, so I think most of this statistics has to do with many companies being absolutely brain dead.

Worse Than U Think (1)

Jim Sadler (3430529) | about 1 month ago | (#47561959)

I am of the opinion that if the typical person is hit by lightening and we add up the liabilities and assets that we will find most people are worth less than zero. Outstanding mortgages, car loans and other loans are only part of the issue. the cost of dying and the costs of burials as well as the cost of settling estates add to the issue but then there are a pile of other issues. The support of your kids, their education, your widow's needs all are considerations. So when you sell off the house and the car and everything else you can bet that it is rare to have enough life insurance to cover it all. Got three teens? How about college for them? Does your pension die with you or does it stay alive for your widow? As a nation America can not afford itself. As individuals we can not afford ourselves and the exceptions are sort of rare.

Relative Window Duration (2)

Bob9113 (14996) | about 1 month ago | (#47561995)

Anyone have other theories why this number is so much higher than the 5% of people who are just "late"?

The first window lasts from 0.08 years to 0.5 years, while the second window lasts from 0.5 years to 7.0 years. The relative window width is (7.0 - 0.5) / (0.5 - 0.08) = 6.5 / 0.42 = 15.47. So if each person only had zero or one debts, and no debt was ever paid off, you'd expect there to be 15.47 times as many debt holders in the second window as in the first. 15.47 * 5% = 77%. So the fact that it is at 35% means that there is some combination of people being in both categories and people paying off their debt while it is "In Collections." If it was 5%, or 77%, you'd be able to make a pretty solid guess that something was hinky, but 35% is in the "could be perfectly reasonable" range.

I'll also echo the sentiment that some creditors do a horrible job of billing. I had a large outstanding debt for years before finding it on my credit report. The company had a typo in my address from the original signup, but had been getting copies of my credit report which had my correct address. They sent all the bills to the incorrect address they had on file, never once contacted me at the address on file with the credit reporting company they had been contacting.

Re:Relative Window Duration (0)

Anonymous Coward | about 1 month ago | (#47562069)

Add to this the victims of identity theft, often cited as nearing ten per cent of the population. Many of them don't find out there is some collection of outstanding debts in their (and their relatives) names until several months down the road when the debt has been sold off to some collection agency.

In the South (0, Informative)

Anonymous Coward | about 1 month ago | (#47562047)

Where republican values prevail.

um yea... (1, Insightful)

Charliemopps (1157495) | about 1 month ago | (#47562071)

I remember I posted a few weeks back that you should never own a credit card. I got modded troll and flamed pretty heavily.

And that's the problem with the publics modern perception of credit. Because I do not have a credit card and suggest that you shouldn't either, I'm considered a quack. I buy just as much useless garbage as anyone that modded me down does. I go on vacations, I order things online, I buy soda at the gas station. The only difference is I don't pay a 7% to 30% fee to do all of those things. And that is exactly what a credit card does. It doesn't help your credit. That's a lie driven by marketing campaigns of credit card companies.

Re:um yea... (2)

brokenin2 (103006) | about 1 month ago | (#47562207)

I haven't had a credit card in over 10 years, and my credit is fantastic. Of course, I've had a couple of car loans, and a home loan... all in good standing and/or paid off, but I never had a credit card when I got any of those loans either, so it certainly wasn't required for good credit.

The only thing I even ponder having a credit card for is for emergency purposes only. I'd consider something with no fees (unless used) for a rainy day backup, but instead of doing that, we've chosen to just have our own rainy day fund.

I am very thankful for the credit card companies though. I don't think that I could heat our home for free without their contribution to our junk mail pile. The rest of the junk mail on it's own just wouldn't be enough..

Re:um yea... (1)

Holistic Missile (976980) | about 1 month ago | (#47562273)

A few years ago, a couple of guys I work with were in serious credit trouble. I told them to each cut up a credit card. They didn't want to, so I rounded up about 4 other engineers, and we all broke out a credit card and cut them up at the same time.

Some of the gals from customer service walked by as we did it, and they started acting like we were slaughtering puppies! For weeks they said that they couldn't believe we would do that! It was pretty hilarious, yet pathetic at the same time.

Is it a legitimate collection? (4, Informative)

schwit1 (797399) | about 1 month ago | (#47562093)

The Michigan teachers union sics bill collector on former members after they legally opted out of the union:
http://poorrichardsnews.com/po... [poorrichardsnews.com]

Re:Is it a legitimate collection? (1)

bill_mcgonigle (4333) | about 1 month ago | (#47562167)

Yeah, it should be higher. People are so afraid of a credit rating problem these days that they will often pay off a "bad debt" that is fraudulent to get their score "fixed".

Creditors know this and are abusive because of it. I tell them to go suck a big one if they pull that crap. It's better to pay cash anyway, but I've actually had very few try to report bogus charges I refused to pay (90% or so are just bluffing).

Frankly I'd trust somebody with 'very good' credit more than somebody with 'perfect credit'.

AND YET!!!! (0)

Anonymous Coward | about 1 month ago | (#47562135)

And yet most of these fools keep spending massive amounts of $$$ for smartphones and other unneeded toys!

Lack of ability to challenge bad debt (4, Insightful)

asmkm22 (1902712) | about 1 month ago | (#47562151)

I ran into this a few years ago. Basically, I got a random call saying I owed about $1k. After asking for the debt verification letter to be sent, I was able to figure out that the debt in question was for some daycare provider in 2009, 3 years before receiving my first collections call. Problem was, we had moved out of that area when this supposed debt occurred, meaning it shouldn't have been charged in the first place. The daycare provider couldn't produce any documentation to support their claim, saying that it happened 3 years ago and they can't find anything. I then called the debt collection agency back and asked for the debt to be discharged as a result, but they said the daycare center claims the debt is valid and won't reverse it. I then opened a ticket with TransUnion (where the collections was listed) and explained the situation. 30 days later I got a letter saying the looked into the debt and determined that it is valid, despite having no documentation to back the debt up, and my documentation showing I wasn't even living in that area. Best part is, I followed up with TansUnion to find out how they validated the debt, and was told they called the daycare center and simply asked them if it was valid; no proof or documentation or anything provided. The whole system is a racket, and there's basically no way to get collections reversed unless the debt involves identity theft. The original creditor has no interest in the truth because they already sold the debt. The collection agency has no interest in the truth because they have already bought the debt. The credit industry has no interest in the truth because it's their core business. The only reason this whole thing hasn't bothered me too much is because since I basically went 4 years before realizing the debt existed, I can just wait for it to fall off my report.
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