These Cities Have The Worst Credit Scores

Could where you live affect your credit score? It’s possible! A 2022 study by the company behind FICO scores found that there are places where, statistically, you’re more likely to have one of the lowest scores across the country. Why is that, and what do you need to know?

The factors that affect your FICO score

Your credit score is the sum of multiple factors that determine how well you can handle borrowing money. Each factor is weighted based on importance by lenders and includes:

• The number of late payments (35%)
• The amount of credit utilization (30%)
• The average age of credit (15%)
• The mix of credit (10%)
• The number of hard inquiries (10%)

Myths (and semi-myths) that don’t affect your score the way you think

Despite credit scoring factors being fairly transparent, there are common myths that so many seem to think affect their credit scores negatively. These often stem from half-truths that get twisted into full-fledged myths that either have no effect on your credit or don’t affect it the way you assume.

For example, there’s a common misconception that having multiple credit cards hurts your credit. On the surface, the number of credit cards you have could positively affect your score, thanks to your mix of credit. However, your score could shoot down quickly if your balances are high or you have a history of late payments on multiple cards.

There’s also the idea that utilizing credit counseling could hurt your credit. This is another factor where the truth gets skewed and needs clarification. First, utilizing credit counseling does not affect your credit. That said, credit counseling services are typically used by people facing financial hardships and are having trouble repaying their debts. If you’re in good standing with creditors, utilizing credit counseling services could improve your score.

The U.S. cities with the lowest FICO scores

When the Fair Issac Corporation completed their study, they found that the average U.S. resident has a FICO score of around 716, considered solidly in the “good” category of scores! However, there were a few metropolitan areas with a much lower average, typically around 695. While that might not seem like a big difference, those 21 points knock the average score from “good” to “fair,” which can severely impact residents’ opportunities for competitive credit and loan offers.

The cities in the US with the lowest average credit score are:

• Houston, TX – 696
• Miami, FL – 695
• San Antonio, TX – 694

Why do these cities score so low?

Based on what we know about how credit scores are tabulated, we can infer a few things:

1. Improper education regarding financial topics – A significant challenge is the relative lack of prioritization regarding financial literacy; many schools across America have neglected to provide basic courses in personal finance, which can hinder establishing an adequate foundation for high credit scores.
2. Cost of living vs. average wage – On average, southern cities tend to have lower costs of living than northern metropolitan areas, which makes them seem more affordable on the surface. However, this isn’t always the case; in fact, many southern cities have relatively high poverty and unemployment rates. The available jobs, though, tend to have lower wages. Texas, for example, adheres to the federal minimum wage of $7.25 an hour. While Florida fares slightly better with $11/hr, it still may not be enough to combat increasing costs for basic necessities, leaving many to rely on credit cards and predatory loans they can’t readily afford.
3. History of debt – Residents of towns that have struggled with chronic debt problems are often more likely to experience a downward trend in their credit scores. This is because creditors become wary of lending to people who appear to be struggling and may be more likely to pull funding from a city’s economy if they perceive it as an ongoing problem.

The bottom line

If you’re considering moving to one of these areas, you must know that there are likely factors beyond your control that will impact your final score. However, by being aware of the myths and misconceptions surrounding credit scores, you can take steps towards mitigating potential damage and improving your odds for success.