Ten American Cities With The Worst Credit Scores

Several other Midwestern cities are among the metro areas with the best credit scores, Experian said. Compared with the rest of the nation, they tend to have lower unemployment rates and less debt.
"Areas of the country that didn't go crazy during the boom are probably still reaping the benefits in terms of their credit scores," says Gerri Detweiler, personal finance expert for Credit.com.


•High foreclosure rates.Las Vegas and Bakersfield, Calif., which are among the metro areas with the 10 lowest credit scores, have been hard hit by the boom and bust of the housing market.
•High unemployment. Harlingen, which is the only city with an average credit score below 700, has an unemployment rate of nearly 13%.
"Right now, those are the biggest issues," says Michele Raneri, Experian vice president of analytics.


The second annual State of Credit list of cities uses the VantageScore credit ranking system. The scores range from 501 to 990.
This is the first time that Wausau was included, because its population has reached the study's required threshold. "It's significant to have a new city come onto the list and be at the top," Raneri says. "It really shows that people are moving into the area."
The national average of 749 is in the C-range. It has fallen from a score of 754 in 2007 before the recession. "We can definitely improve," Raneri says. "In good times some cities might edge up to a B."
There have been changes in the right direction. The national score is up one point over 2010. And five out of the 10 lowest cities were able to raise their scores and decrease their debt in the past year. As consumers learn about the credit score of their city, Experian hopes they will also want to improve their own score.
Consumers with a good credit score pay lower interest rates and can be more selective when choosing a lender. In addition, "it makes it easier to get credit when you really need it," Detweiler says. "But for many people, it's tough to focus on building their credit when they don't have a job or have just lost their house."


The cities with the worst credit scores primarily fall into two categories. In the first category, the cities’ median household incomes are significantly lower than the national average of $51,425, and the cities’ average debt is medium to high. Very poor cities such as El Paso, TX, and Jackson, MS fall into this category. Because they are so poor, with such low income, their debt level, even if it is the same as that in other cities with better credit scores, is a larger burden and is more difficult to pay.


The cities in the second category have exceptionally high foreclosure rates and high unemployment rates. The national foreclosure rate, as of August 2011, was one in every 570 properties, according to RealtyTrac. But in cities like Las Vegas and Bakersfield, the foreclosure rate is one in every 115 and one in every 159, respectively. These cities also have unemployment rates above 14%, much higher than the national average of 9.1%.


It is interesting that a city must have both a high foreclosure rate and high unemployment rate to be among those with the worst credit scores, according to 24/7 Wall St.’s analysis. For example, Charlotte, NC, which has an unemployment rate of 11.1% but an average foreclosure rate only has the 93rd worst credit score. This a far cry from Las Vegas’s rank of 136.


To better understand what might impact a city’s credit score, 24/7 Wall St. first reviewed the data from Experian. We then included unemployment rates from the Bureau of Labor Statistics, foreclosure rates from RealtyTrac, and median household incomes from the Census Bureau.