Experian’s Annual State of Credit Map – Things to think about…

In today’s newsletter from inmannews.com, I came across an article about “How real estate distress can scar credit scores?”. We all know that Shortsales, foreclosures, Bankruptcies really make a big dent on the credit scores. But when those situations happens, people really don’t have time to think about their credit score instead they were thinking about running their daily lives. That’s important point which we miss out on these infographics from credit bureaus.

Experian released, the Annual State of Credit Map for this year. The credit bureau and financial data company ranked more than 100 metropolitan areas in all 50 states in the order of their average resident’s credit scores.

Here is my city Houston’s State of Credit,

Houston did fare decent compared to many metropolitian cities and being the 4th larges city in nation. It averages 724 score which corelates with unemployement percentage of 9% and foreclosure around 1250 homes.

If you go over the list from top and bottom of 10 cities, one pattern instantly emerges: Eight of the 10 American cities(Red circle) with the highest credit scores are in the Midwest (the outliers were San Francisco and Sioux Falls, S.D.). A parallel pattern emerges on the other end of the credit score rankings: Eight of the 10 cities(Yellow) with the lowest credit scores are located in the South (rounding out the list: Bakersfield, Calif., and Las Vegas).

Experian points out on its graphic of the list that there seem to be strong correlations between a metro area’s average debt (that nine of the 10 cities on the high-credit-score list have unemployment scores below the national average. This makes sense, as it would seem difficult to pay your bills on time every month with no job and no income.

The report also found some regional patterns in debt levels consistent with the credit score rankings; six of the 10 American cities with the lowest levels of debt were in the Midwest, and eight of the 10 with the highest debt levels were in the South.

It was most intriguing to see the real estate and mortgage insights layered within the study. If you go to the interactive map, you’ll see that it allows you to mouse over individual metro areas and see a set of data points for each locale, including its average credit score, average number of open credit card accounts, average debt, population, unemployment rate, and the area’s foreclosure activity over a one-month time frame.

The conclusion is almost inescapable that cities like Bakersfield and Las Vegas, the two non-Southern cities on the lowest credit score list, made it onto the list as a result of the unfortunate one-two punch: sky-high unemployment and chart-topping foreclosure rates.

At the top of the credit score list, the reverse also seems to be true — Midwestern cities have been notoriously resistant to the real estate recession compared to the rest of the country, as have San Francisco and Sioux Falls, the only two non-Midwestern areas on the list. And this is backed up by the low foreclosure rates reflected in the data on the infographic for these areas.

From this map, it is clear that real estate turmoil will cause the credit score to go south. At the same time, even people who are trying to avoid those turmoil faces same issue with credit by charging off the credit card to pay mortgage, stop making mortgage payment while trying to do modification and so forth. Even though many analyst say don’t go beyond your limits, try avoiding charge offs and pay mortgage on time, these advices won’t work if a bread winner loses his/her job for months and trying to sort out things. It is a tough ordeal unless you have big Emergency fund to fall back on.

Source: Inmannews.com

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