Does Location Affect Credit Card Debt & Scores?
A new study indicates consumers paid off $38 billion of their roughly $1 trillion in credit card debt during the first quarter of 2019.
Giving businesses and people credit is the focus of several recently released reports that are focused on small business loan approvals, POS lending and credit scores by locations.
The second of this two-part Web focuses on credit-card debt and credit scores.
WalletHub, in its latest Credit Card Debt Study, found that consumers paid off $38 billion of their roughly $1 trillion in credit card debt during the first quarter of 2019 but the first-quarter paydown was smaller than last year’s. WalletHub now projects a $70 billion net increase in credit card debt during 2019.
Why is the first-quarter paydown a bad sign for credit card debt? “History tells us the size of the paydown matters,” WalletHub CEO Odysseas Papadimitriou, said. “It’s normal for credit card debt to decrease during the first quarter of the year as consumers receive annual salary bonuses and tax refunds as well as commit to financial New Year’s resolutions. But a relatively big or small first-quarter paydown can be an important indicator for consumer performance throughout the rest of the year.”
Papadimitriou maintained, “In 2018, we began the year by paying off almost $41 billion in credit card debt during the first quarter, and we ended the year owing $67 billion more than we did to start. The fact that we didn’t pay down as much debt during Q1 this year may be a sign that consumers aren’t quite as healthy as some other metrics may indicate.” He also warned, “If the average household’s credit card balance tops $10,000, that would be a breaking point.”
Some areas have bigger payment problems than others. WalletHub compared more than 2,500 cities based on how much residents owe to credit card companies.
Online publication FitSmallBusiness.com studied why good credit scores unevenly dispense across the U.S. with generally, the average credit score higher in northern states than the average credit score in southern states.
According to the editors at FitSmallBusiness.com, the education tends to be higher in the North, which results in more responsible decision-making, and often, higher incomes. Southerners tend to suffer from bad personal credit due to poorly ranked educational systems and a heavy dependence on government aid. Southerners also tend to have higher bankruptcy filing rates than northerners. These intriguing correlations prompted the editors to analyze other location-specific factors that might affect credit scores such as financial, social, personal and environmental factors for each state.
Other factors considered in the analysis: cost of living (10%), median household income (10%), quality of public education (10%), percentage of residents with a bachelor’s degree (10%), unemployment rates (10%), average debt per person (10%), bankruptcies per 100,000 residents (10%), median age of residents (10%), state spending on public assistance (10%), marital status (10%)
“None of this means that any individual northerner is more credit worthy than any individual southerner,” Sarah Wright-Killinger, Managing Editor, FitSmallBusiness, said. She added: “But, it is interesting to see how credit scores and location correlate.”
Best states for credit scores, starting at the top: Minnesota, Vermont, New Hampshire, South Dakota, Massachusetts, North Dakota, Wisconsin, Iowa, Nebraska, Hawaii, Washington, Connecticut.
Worst states for credit scores, starting at the bottom: Mississippi, Louisiana, Alabama, Georgia, Nevada, Texas, Oklahoma, South Carolina, Arkansas, West Virginia, New Mexico, Tennessee, Kentucky.