Most consumers know that a good credit score is critical to buying anything of value, from relatively affordable mobile phone plans to seven-figure homes. However, the key to securing that good credit may extend beyond the reduction of debt and the increase in equity. It may be affected by where you live.
Indeed, a recent ranking of average credit scores by state found that there is a remarkable divide in the United States. Generally, northern states have higher average credit scores than those in the South. Why? The quality of education is higher in the North, which results in more responsible financial decision-making and higher incomes. Southern states, meanwhile, generally suffer from bad personal credit as a result of poorly ranked educational systems and heavy dependence on government aid—not to mention high bankruptcy rates.
These correlations prompted Fit Small Business to examine other location-specific factors that might affect credit scores; as part of our study, we researched financial, social, personal, and environmental factors for each state.
Here are the factors we considered in our analysis:
- Cost of living (10%)
- Median household income (10%)
- Quality of public education (10%)
- Percentage of residents with a bachelor’s degree (10%)
- Unemployment rates (10%)
- Average debt per person (10%)
- Bankruptcies per 100,000 residents (10%)
- Median age of residents (10%)
- State spending on public assistance (10%)
- Marital status (10%)
States With the Best Credit Scores
Here are the 10 states with the highest average credit scores and the location-specific factors that affect them:
Credit Score: 709
Minnesota leads the country with the highest average credit score of 709. Known for its kind-natured culture, it’s a state that also knows its way around personal finances. Likely, that’s owed to a few factors; Minnesota is the seventh-best state for education quality, with 35% of the population boasting a bachelor’s degree, and has the ninth-highest percentage of married residents. Learned responsibility and shared debt are likely keys to the state’s high average credit scores.
Bafflingly, however, Minnesota also has the highest average amount of debt per person at $113,455, coupled with an above-average cost of living. While it’s hard to pinpoint how this figures into a high credit score, it’s likely much of that is “good” debt in investments that build equity, like houses and cars. In fact, Minnesota boasts a higher-than-national-average homeownership rate of 69.8% (the national average hovers between 62% and 64%).
Credit Score: 702
Vermont, known for its rural New England farmland, green mountains, and Ben & Jerry’s ice cream, comes in at No. 2 for the nation’s highest credit score with an average score of 702. A couple of factors are at play here: The state boasts the nation’s third-lowest personal bankruptcy at 115 per 100,000 residents—58% lower than the nation’s average of 277—while it also touts the country’s lowest unemployment rate of 2.4%, which is tied with New Hampshire.
Additionally, the average age in Vermont is the highest in the top 10 states at 43.1 years old. Although it would be illegal for age to be a factor in determining credit scores, the length of credit history is taken into account. It’s no surprise, then, that there is a direct correlation between age and credit score, where the top states in our ranking have an average age above the national average of 37.8. This, combined with the lowest unemployment rate and the sixth-best education system, creates one ideal mix for high credit scores.
3. New Hampshire
Credit Score: 701
New Hampshire lands at No. 3 three on our list with an average credit score of 701. With Vermont, it shares the brag-worthy fact that it has an astoundingly low unemployment rate of 2.4%. It also has the nation’s fourth-highest education quality score and the eighth-highest percentage of residents with a bachelor’s degree.
What’s more, New Hampshire has the highest median household income of the top three states on our list, clocking in at $70,303. Among the top three, it also has the highest education quality score, the highest percentage of married residents, and the lowest average amount of debt per person at $24,091, which is 64% lower than the national average. So, why aren’t credit scores higher? It turns out the cost of living in New Hampshire isn’t tops as it ranks 34th of all 50 states.
4. South Dakota
Credit Score: 700
Trailing New Hampshire by just one less point, South Dakota has the country’s fourth-highest average credit score of 700. It also has the nation’s third-lowest debt per person at $6,738.38, the fourth-lowest unemployment rate, and the ninth-highest percentage of married residents. It’s unlike the other top 10, however, in that it has a lower than average percentage of residents with a bachelor’s degree and the lowest median household income, coming in at only $53,017.
The lower-than-average income is offset by the lower-than-average cost of living and low debt per person, which is 90% below the national average. This makes it clear South Dakota’s high ranking is due primarily to low unemployment and low cost of living, which is evidence that location-specific factors play key roles in determining credit scores.
Credit Score: 699
The nation’s most educated state and home of the highest density of higher educational institutions also boasts the nation’s fifth-highest credit score of 699. It is also the second-most expensive state, falling only behind Hawaii’s cost of living index of 133.8. However, this is offset by the state’s average household income of $70,628, which is the sixth-highest in the U.S. Massachusetts also has the nation’s ninth-lowest bankruptcy rate of 154 per 100,000.
However, education seems to be the key here; Massachusetts has the highest education quality score in the U.S. and the highest percentage of residents with a bachelor’s degree at 42.1%. In fact, five of the top 10 states on our list are also in the top 10 states for the highest percentage of residents with a bachelor’s degree, solidifying the correlation between education and high credit scores.
6. North Dakota
Credit Score: 697
North Dakota, one of the few states left whose economy remains reliant on farming, has the nation’s sixth-highest average credit score of 697. Additionally, it has the country’s second-lowest personal bankruptcy rate (second to Alaska) at 95 per 100,000—83% lower than the national average of 227. It also stands out for having the youngest average age in the top 10 list at 34.4, lower than the national average of 37.8.
The key to North Dakota’s high average credit score seems to be its low bankruptcy rate. Indeed, bankruptcy and bad credit are directly linked; five out of the top 10 states on our ranking are also in the top 10 states for fewest bankruptcies. While we’ve already shown a correlation between older residents and higher credit scores, it seems that North Dakota’s young population leans on other factors to keep their credit scores high, including an incredibly low cost of living.
Credit Score: 696
Wisconsin is more than fields, dairy farms, and cheese. It’s also a state with the nation’s seventh-highest credit score of 696. Just one point behind North Dakota, Wisconsin has a couple of financial and environmental factors working for it. Primarily, it has the fourth-lowest unemployment rate in the nation and the ninth-best education quality score.
What’s more, Wisconsin boasts a lower-than-national-average cost of living with an index of just 95.8. When you pair this with a mid-range average income of $55,638, you end up with a state that’s prime for responsible debt management.
8. Iowa (Tied)
Credit Score: 695
Iowa is tied with Nebraska for No. 8 with a credit score of 695. It has the lowest cost of living out of all of the top 10 states and is tied with Vermont and New Hampshire for the nation’s lowest unemployment rate. It’s also in the nation’s top five states for the highest percentage of home ownership at 72.4%, according to World Atlas.
Iowa’s low cost of living—the 12th-lowest cost in the nation—is not matched by a low average income. Instead, the state’s average median income is the 25th-highest at $54,736. It also has the nation’s fifth-highest percentage of married residents at 52.8% and the nation’s 16th-highest education quality score. These combined factors provide the perfect combination of financial and environmental factors for a high average credit score.
8. Nebraska (Tied)
Credit Score: 695
Nebraska shares the No. 8 spot with Iowa with a credit score of 695. It has the nation’s fourth-lowest amount of debt per person at $8,426, has the nation’s third-lowest unemployment rate at 2.8%, and is within the top 10 least dependent states on state and federal aid for public assistance programs such as welfare. It also has the highest percent of married residents out of the top 10 states and the nation’s fourth-highest percentage of married residents.
There is a common thread between high credit scores and high percent of married residents. Seven of the top 10 credit scores are in the top 10 highest percentage of married residents while four of the 10 worst credit score states have the lowest percentage of married residents. This may be because married couples typically have two incomes and can manage shared debt more effectively.
9. Hawaii (Tied)
Credit Score: 693
Hawaii lands at No. 9, alongside Washington State, with an average credit score of 693. But this ranking is somewhat baffling; Hawaii has the nation’s highest amount of debt per person at an astounding $869,250—owing to high housing costs—has the highest cost of living in the country and is in the bottom quarter of all states for quality education.
So, what’s keeping Hawaii’s credit afloat? The median income, for starters, at a high of $73,486, alongside a low unemployment rate of 2.7% and a relatively high percentage of married couples.
9. Washington (Tied)
Credit Score: 693
Washington state shares the No. 9 position with Hawaii, yet the Evergreen State achieves the same credit score with a very different culmination of statistics. It has an average debt per person of $32,562.97, which is less than 4% of Hawaii’s average debt per person, and lower-than-average state dependence on public assistance programs such as welfare.
Also, Washington has a notably high median income of $64,129—the 10th highest of all states—and boast an educated population with 34.5% claiming a bachelor’s degree. Add to this the more than 50% of the population that’s married, and you have the makings of a state with high average credit.
Credit Score: 690
Connecticut takes the 10th spot on our list with an average credit score of 690. It has the second-highest median income in the top 10 at $71,346 and boasts the second-best education quality in the top 10 states. Also, Connecticut has the second-highest percentage of residents with bachelor’s degrees at 38.4%.
There’s little doubt that education is the key factor in Connecticut’s high credit scores. However, high average debt at $32,045.45 and high cost of living put it lower on our list than it otherwise might have been.
States with the Worst Credit Scores
Here are the 10 states with the lowest average credit scores and the location-specific factors that affect them:
Credit Score: 647
A lot is blossoming in the “Magnolia State,” but that doesn’t include credit scores; the state has the lowest average credit score in the nation at 647. It also has the nation’s lowest median income at $40,593, which is 32% lower than the national average of $56,022, and the second-highest level of state dependency on public assistance programs, just behind New Mexico.
The positive financial data for Mississippi, such as having an average education quality score and below-average amount of debt per resident at just $24,083.34, don’t overcome the state’s credit deficit. Perhaps the most likely explanation for low credit scores in Mississippi is rooted in the state’s low median income. As our data shows, there is a clear, nationwide correlation between low income and low credit scores.
Credit Score: 650
Louisiana claims the nation’s second-worst credit score, coming in at 650. Similar to Mississippi, it has a low cost of living and one of the nation’s lowest median incomes at $45,727.
What may not be expected of a state with a low credit score, Louisiana has the nation’s second-lowest amount of debt per person at only $6,139. Unfortunately, this is not enough to overcome a very poor education score—ranking 48th among the 50 states—and a low median income.
3. Georgia (Tied)
Credit Score: 654
Georgia is tied with Alabama at the third-worst state for credit score with an average score of 654. It has the second-highest rate of personal bankruptcy with 524 bankruptcies per 100,000 residents, which is nearly double the national average.
What’s more, Georgia’s credit score suffers from poor education—ranking 37th out of 50. This bottom quartile ranking ties into another clear correlation in our data: States with poor education typically see lower average credit scores.
3. Alabama (Tied)
Credit Score: 654
Alabama shares the third-worst credit score with Georgia with an average score of 654. Like Georgia, Alabama has some of the highest numbers of personal bankruptcies at 519 bankruptcies for every 100,000 residents. Debt is below the national average, at $23,902 per resident, but income is also low at under $45,000.
Not surprisingly, the factors mentioned above, in addition to a poorly ranked education system, correlate to overall poor credit health. Supporting this is a high dependence on government assistance and aid, which is the fifth-highest among all 50 states.
Credit Score: 655
Nevada has the fourth-worst average credit score with an average score of 655, which is just one point ahead of Georgia and Alabama. It has a higher-than-average amount of debt per person of $165,739, which isn’t surprising, given that it also has a higher-than-national-average cost of living and the highest cost per living of the bottom 10 states.
What is unique about Nevada is that unlike most states that have a median income proportionate to its cost of living, Nevada has a high cost of living with a below average median income. This gap helps explain the high amount of debt per person, potentially illustrating how high expenses and low income can lead to poor credit.
5. Texas (Tied)
Credit Score: 656
The Lone Star state is tied with Oklahoma at number five for worst credit, with an average score of 656. What’s unique about the data surrounding Texas is that it has the second-lowest average age of residents at just 34.4. Its youthful population may hurt the state’s average credit score as there is generally a correlation between younger residents and lower credit scores, due to a lack of time to build up credit.
It’s also important to mention that Texas’s education system is ranked 35th among all 50 states. As we’ve seen with other states in our ranking, those with poor education systems tend to see lower average credit scores.
5. Oklahoma (Tied)
Credit Score: 656
Oklahoma’s 657 average credit score is the nation’s fifth worst, tied with Texas. While the state boasts the second-lowest cost of living in the country, it also has the fourth-highest average debt per person of $174,838. Additionally, the median household income is in the bottom 25% of all states at $48,568. The combination of low income and high debt is a perfect storm for lower-than-average credit scores.
One major difference in data between Oklahoma and Texas is the rate of personal bankruptcies. While each state has similar data in terms of cost of living, the average debt per person, unemployment rate, education quality score, and percentage of residents with a bachelor’s degree, what separates them is that Oklahoma’s personal bankruptcy rate is nearly double that of Texas.
6. South Carolina (Tied)
Credit Score: 657
South Carolina is tied with Arkansas for the sixth-worst average credit score in the nation with a score of 657. Like the vast majority of states with the worst credit scores, South Carolina has a low cost of living, lower-than-national-average median income, and low education quality score. Surprisingly, however, it does have a low rate of personal bankruptcies with just 153 bankruptcies per 100,000 residents and a low unemployment rate.
The state’s low median income, however, is a big factor in delivering poor overall credit health. Another killer for South Carolina’s credit scores is education quality, which sits in the nation’s bottom quartile. The state is also highly dependent on government assistance.
6. Arkansas (Tied)
Credit Score: 657
Arkansas shares an average credit score of 657 with South Carolina, the sixth-worst score in the country. It contrasts South Carolina, however, by having one of the highest rates of bankruptcies in the country with 374 per 100,000 residents. Additionally, the median income is low at only $41,995, which is 25% lower than the national average.
Arkansas also has one of the lowest ranked education systems in the country, which is 40th out of 50 states. As we’ve shown in other inclusions, this is a key factor in low average credit scores.
7. West Virginia
Credit Score: 658
West Virginia, the northernmost state on the East Coast to land in the 10 worst credit scores, lands at No. 7 with an average score of 658. It has the third-lowest median income in the nation at $42,019, the nation’s second-highest unemployment rate, and the lowest percentage of residents with a bachelor’s degree in the country at just 19.9%.
Predictably, a state with a low education quality score and the lowest percentage of residents with a bachelor’s degree would have one of the nation’s lowest average credit scores. Additionally, West Virginia is highly dependent on government assistance; they rank fourth among all 50 states.
8. New Mexico
Credit Score: 659
New Mexico is at the nation’s No. 8 spot for the worst credit score, with an average score of 659. It has a slightly disproportionate median income to cost of living, with the nation’s 13th-lowest cost of living, but the nation’s sixth-lowest median income of $45,382. It also has the nation’s highest level of state dependency on public assistance programs such as welfare.
New Mexico also has a strikingly low ranking for education quality as it sits at 49th of all 50 states in our ranking. This, combined with low income, relatively high unemployment, and low income make New Mexico prime for low average credit scores.
Credit Score: 662
Tennessee, with an average credit score of 662, has the ninth-worst average credit score. It as an astonishingly high rate of personal bankruptcy, with the nation’s highest number at 610 per 100,000 residents. That’s more than twice the national average of 277. It also has the ninth-lowest median income of $47,275.
This high-bankruptcy state also slumps for education, ranking 35th out of 50 states. Perhaps not surprisingly, public assistance is high. Little wonder, then, that Tennessee endures one of the nation’s lowest average credit scores.
Credit Score: 663
The Bluegrass State has an average credit score of 663, landing it at the No. 10 for the worst credit score in the U.S. It has the nation’s third-highest state dependency score, the fourth-lowest percentage of residents with a bachelor’s degree at 23.2%, and the fifth-lowest median income of $45,215.
It’s logical that a state with a low percentage of residents with a bachelor’s degree would also have a lower median income as education and credit are correlated. What is different about the data set surrounding Kentucky is that while it has a low percentage of residents with a degree, it has an average education quality score. For this reason, the state may fare better than other states with below average education quality scores and low income.
Credit Scores by State
Click here to see all data considered in our study
Average credit scores in our ranking were provided by Experian, a leading consumer credit reporting company. To help make sense of this data and determine the correlation between location and credit scores, we considered the cost of living, education, unemployment rates, average amount of debt per person, demographics, and bankruptcy rates.
States were analyzed based on the following criteria:
Cost of Living & Income (20%)
The cost of living was reviewed using two metrics: the 2018 cost of living index as provided by the Missouri Economic Research and Information Center, and median household income by state, according to Money.com. Cost of living is the primary factor in a resident’s regular expenditures, making it a primary consideration in our research.
Education was factored using two metrics: public education quality scores as provided by WalletHub, and the percentage of residents by state with a bachelor’s degree as provided by Wikipedia. Education determines knowledge of how financial systems work, enabling responsible financial decision-making and the likelihood of employment.
Demographics analyzed in our study included average age of residents by state, as available by OverFlow Data, and the percentage of married residents, culled from research by MSN. Though demographics such as age and marital status are not factors in credit scoring, they may play an indirect role; older residents have longer credit histories that may affect debt, while married residents often share debt loads and two incomes.
Dependence on State Assistance (10%)
An indicator of poor financial health and low credit, high dependence on state assistance was a key consideration in our study. Leveraging a study by WalletHub, we gauged each state’s use of government assistance, such as welfare.
Personal Bankruptcies Per 100,000 Residents (10%)
Bankruptcies are inherently damaging to credit scores, and so we considered average personal bankruptcy rates by state, as available by WorldAtlas.
Unemployment Rates (10%)
Unemployment rates by state are available from the U.S. Bureau of Labor Statistics. It confirms whether or not there is a direct correlation between unemployment, debt levels, and a consumer’s ability to make payments, thus affecting credit scores.
Average Amount of Debt Per Person (10%)
The average amount of debt per person by state is available from a study by GOBankingRates. Debt utilization is a key factor in determining an individual’s credit score, making this a central consideration in our ranking.
The consideration of both financial and location-specific factors in our study, including income, resident age, cost of living, and bankruptcy rates, helped link average credit scores to specific locations. While it is evident that location is not the sole determiner of an individual’s credit score, it is a factor worth considering.
To ensure you have the highest credit score, weigh each of the criteria in our study and take every opportunity to increase income, reduce debt, and consider moving to locations with plenty of educational opportunities, low unemployment, and a low cost of living.