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