After the credit crisis, it’s been encouraging to see that across America credit scores have been slowly improving. Despite the improvements, many scores are still lacking. As to be expected, some cities that have been hard hit by the crisis still have very low credit scores — up to 18% lower than the national average. Using data from Experian, a credit information group, 24/7 Wall St. reviewed the ten cities with the worst credit scores.
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.
These are the ten American cities with the worst credit scores.