Insights Into 2023’s States With the Best and Worst Credit Scores
The average credit score in the U.S. is 696, just below the bottom threshold of a good credit range (700).
Despite economic headwinds and the pressure of inflation, a recent WalletHub survey reveals a positive trend: 31 out of 50 states’ credit scores surpass the pivotal 700 mark.
Where financial well-being is concerned, a credit score is an important indicator. It enables access to essential aspects of life: being approved for loans, renting homes, and more.
During tough financial times, people often turn to credit cards. However, experts recommend keeping card balances below 30% to prevent any adverse impact on credit scores.
A better credit score helps manage debts better and supports responsible credit usage, ultimately benefiting your overall credit health. Achieving the coveted 750 to 850 credit score remains a pursuit for many, but some states have already taken significant steps toward helping residents achieve this goal.
Top States Boasting the Highest Average Credit Scores
The WalletHub survey is a comprehensive report on the states with the highest and lowest credit scores based on TransUnion data. Minnesota, New Hampshire, Vermont, Massachusetts, and Wisconsin lead the states with the highest credit scores nationwide.
Minnesota boasts the highest average credit score in 2023, an impressive 725. The achievement reflects the state’s robust economy, job opportunities, and financial responsibility among its residents. According to TransUnion, only 9.65% have credit collection accounts or other derogatory marks on their reports.
2. New Hampshire
New Hampshire holds the second position. Its citizens secure an average credit score of 722, and demonstrate a commendable financial discipline. A well-educated population, prudent financial habits, and a relatively low unemployment rate of 2.1%, well below the average rate of 3.9% nationwide, are all contributing factors.
Vermont follows closely behind, with an average credit score of 721. According to the U.S. Census Bureau, the homeownership rate of 74.7% is the highest in the country, which may be one of the contributing factors to the state’s high average credit score.
Massachusetts holds the fourth position with an average credit score of 718. The state’s diverse and dynamic economy, driven by sectors such as healthcare, technology, and education, plays a role in maintaining high credit standards.
Rounding out the top five, Wisconsin maintains a robust average credit score of 718. The state’s economy, rooted in manufacturing, agriculture, and healthcare, provides stability for its residents. Wisconsin’s disciplined financial habits and prudent economic management contribute to its residents’ high creditworthiness.
States With the Lowest Average Credit Score
Based on the WalletHub study, the states with the lowest credit average scores nationwide are Oklahoma, Texas, Alabama, Louisiana, and Mississippi.
Oklahoma takes the 46th spot with an average credit score of 681. Economic factors such as job market conditions, income levels, and the cost of living contribute to the lower credit scores observed in the state.
The unemployment rate in Texas was 4.1% in October 2023, which was higher than the national average of 3.9%. The higher-than-average unemployment rate may contribute to the lower average credit score of the state.
In the 48th position, Alabama’s average credit score is 680. A recent study by the U.S. Census Bureau reports that Alabama ranks seventh nationwide for the most people living below the poverty line.
Income inequality and people living below the poverty line could highly influence credit scores in the state. Addressing these factors and advocating for financial literacy could be crucial to enhancing credit health in Alabama.
Louisiana comes in at 49th place with an average credit score of 676. The state, known for its rich cultural heritage and economic reliance on sectors like energy and tourism, faces financial challenges that can impact residents’ credit profiles.
Louisiana ranks third in terms of people living below the poverty line nationwide, but initiatives focused on economic diversification and financial education may contribute to positive changes.
Mississippi holds the lowest average credit score nationwide, at 672. The gap between the lowest and highest states highlights the diverse financial realities faced by individuals across the U.S., with some struggling with economic challenges and limited access to financial resources.
Experts Share How To Build an Effective Credit Score
Dean Smith, Senior Director of Student Centers for Student Life at East Carolina University, suggests, “First, educate yourself on the basics. Credit means loans you have taken out with lenders.”
Personal Finance Extension Specialist at the Margaret Ritchie School of Family and Consumer Sciences, Luke Erickson, says, “Use two to three credit cards sparingly, keep them open for a long time, never miss a payment, and avoid subprime lenders.”
“If you have one credit card that you have a good payment history with, then you can open another account,” adds J. Keith Baker, a faculty member at North Lake Campus of Dallas College. Baker continues, “You should, however, avoid borrowing up to the limits of these cards as the way you can lower your credit utilization which represents a borrower’s current debt as a percentage of their available credit and thereby improve their credit score.”
One strategy to improve your credit score is to increase your income and pay down outstanding debt. That can involve having side hustles.
A person’s access to credit depends on more than just income and debts; factors like payment history, credit history length, diverse credit types, negative marks (e.g., bankruptcies), and credit utilization are crucial for your credit score. Additionally, boosting financial stability involves exploring ways to earn extra income and doing no-cost activities, contributing to a more robust financial profile.
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