The credit card Chris Mezyk received before college was meant to pay for food and getting around. But it didn't stop there.
"It quickly turned into the bar tab card, which turned into the 'I've got to find a way to get to work and I can't pay for it' card," said Mezyk, 26, of Jefferson Park.
Mezyk ended up owing nearly $10,000 on the card, and he said he couldn't afford the payments. He started ignoring calls from the credit card company and then from a collections agency. Then the collections agency started calling around.
"Finally they ended up calling one of my friends," Mezyk said. "I never in a million years thought they'd be able to find their phone number."
The debt was almost too big to even think about, he said. "I see numbers, I freak out," he said. "I can't really do this right now."
He ended up striking a deal: The agency will consider his debt settled if he pays half of his balance by November.
But the damage to his credit likely has been done already, and recently, he got a letter letting him know his student loans are about to default.
"I've kind of been getting hit by a lot of financial stuff lately," he said.
Mezyk is far from alone. Of Chicago-area residents with a credit file—the history that accumulates with loans, credit cards and utility bills—34.7 percent have a debt in collections that's not tied to a home mortgage, according to a recent report from economics think tank the Urban Institute. That's in line with the national average of 35 percent, a figure the Institute report calls "alarming."
"It is a stunning number that one in three Americans have a debt in collections on their credit file," said Caroline Ratcliffe, a senior fellow at the Urban Institute and co-author of the report. "It is pervasive in threads all across communities."
Debts are considered "past due" when a payment is between 30 and 180 days late. After that, unpaid debt generally is reported as being in collections. That can spell financial doom for the borrower.
"The important piece here is that delinquent debt can harm consumers," Ratcliffe said. "It can lower credit scores, which can restrict access to credit, increase the cost of credit … [it] could affect employers' hiring decisions and even whether you get that apartment."
That's what happened to Gabrielle Bondi, 25 (right), when she and her parents were looking for a new place to live and one delinquent $40,000 student loan she took out in 2007 came back to bite her.
"Everyone asks for credit applications and stuff like that when you apply to rent somewhere, and because I'm an adult I have to also apply with [my parents]," said Bondi, who lives with her parents in Dunning on Chicago's Northwest Side. "It pretty much kills all our chances because my credit score is so bad."
A debt in collections can remain on a borrower's credit file—the report that financial institutions, employers and landlords use to determine your creditworthiness—for up to seven years, according to Ratcliffe.
"People may not know they have this debt in collections on their credit file," Ratcliffe said. "It's important that people get their free credit report and see their credit file to see what's there."
Ratcliffe declined to draw any conclusions about why delinquent debt is so high, but she did mention that student debt in particular is the only kind of consumer debt that actually has increased since the Great Recession.
"Since the Great Recession, you see that people have been paying down their debt. Credit card debt, vehicle loans, you see a decline," she said. "Most kind of debt goes down, except student debt. That goes up."
Ratcliffe also was quick to mention that debt can be used in a positive way, as "personal infrastructure."
"Debt isn't necessarily bad. There's productive debt: buying a home, starting a small business, investing in education," she said. "There are upsides to debt, but there can also be downsides."
Bondi said she has not made any payments at all toward her delinquent loan, not even after she got a letter notifying her the debt was in collections. Her grandmother and uncles have gotten calls from agencies trying to reach her and collect the debt. Like Mezyk, Bondi said her debt is too overwhelming to even really think about.
"I feel like a lot of people might think that I'm just being selfish," she said. "In some sense, they're right, but I have paid my other loans back or [am] in the process of it. … There were just some things that were done to people who don't know better, and you have to have sympathy for those situations."
The ordeal has made her much more aware of her finances, she said.
"It was a big money lesson. I went from [being] 18, not knowing anything, and now understanding what it means to take out a loan and how interest works," Bondi said. "You kind of think twice about it. Or three or four times about it. I haven't taken out any loans since then."
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Checking your credit report
Caroline Ratcliffe of the Urban Institute has one big recommendation after studying delinquent debt.
"Consumers should check their credit report, know what's there and take action if they think something is there in error," she said.
Your report will show every part of your credit history that has been reported to the three major credit bureaus. You can pull three reports per year for free—one for each credit bureau—at annualcreditreport.com. Not only will checking your report paint a picture of your financial health, it could help alert you to identity theft issues and incorrectly reported penalties.
If you spot something inaccurate, you can alert the credit bureau in writing of your suspicions. A sample letter with which to do so is available at consumer.ftc.gov.