10 best states for credit

You could easily get the impression from the slow economic recovery that all of America is staggering under the weight of personal debt and credit problems. After all, our debt burden did soar in the months leading up to the start of the recession, the best credit cards are just now starting to get better, and an extended real estate slump has exacerbated mortgage problems for many homeowners.

It may surprise you, then, to learn that there are parts of the country where credit ratings are strong, joblessness is low, payment delinquencies are rare, and bankruptcies rarer still. CardRatings.com has identified these areas in a list of the top 10 states for credit.

Whether you represent a firm looking for promising areas in which to do business, or simply are an individual looking to live in a place where the economy is thriving, this list of the top 10 states for credit may help you make your decision.

The 10 states with the best credit health

Maybe it's something about the cold weather that makes people financially conservative, or maybe it's because much of the northern plains and Rockies didn't go through the boom-and-bust cycle that continues to plague many warm-weather locations. Whatever the reason, there is a heavy weighting toward cold-weather states in the top 10 states for credit. Here is the list of the top 10, with a description of what stood out about credit conditions in each state.

North Dakota, one of 10 best states for credit

1. North Dakota. North Dakota came out on top in this survey by having the lowest rates of unemployment and credit card delinquency of any state in the U.S., and by being among the best five states in all categories used for this study.

 

Vermont

2. Vermont. This northern New England state has the lowest rate of home foreclosures, by a very wide margin. While nationwide one of every 2,370 housing units is in foreclosure, there is only one foreclosure for every 39,281 housing units in Vermont. Like North Dakota, Vermont was among the five best states in all five categories examined.

 

South Dakota, one of 10 best states for credit

3. South Dakota. The home of Mount Rushmore was just edged out by Vermont, but ranks in the top six in all five categories, including having the second-best average credit score of the 50 states.

 

Nebraska

4. Nebraska. After North Dakota, Nebraska has the second-lowest unemployment rate of any state, and ranks among the 10 best states for average credit score, foreclosure rates and credit card delinquency rates. However, it lags a bit when it comes to bankruptcy rates, where it ranks around the middle of the pack.

 

Montana


5. Montana. Big Sky Country made the list on the strength of being among the 10 best states for credit scores and low credit card delinquencies, and was clearly above-average in all five categories.

 

Wyoming

6. Wyoming. The Equality State was among the best 10 states in four out of five categories, missing only in terms of average credit score. Wyoming's average credit score of 703 is just a few points better than the national average of 696.

 

Iowa, one of 10 best states for credit

7. Iowa. Iowa ranked among the 10 best states for credit scores, low credit card delinquencies, and low unemployment, but fell down somewhat when it came to foreclosure rates. Iowa's rate of one foreclosure for every 878 housing units is worse than the national average, and worse than the foreclosure rates of 28 other states.

 

Pennsylvania

8. Pennsylvania. A solid overall contender, Pennsylvania didn't dominate any one catergory, but made the list by being consistently pretty good across the board. Pennsylvania was not in the top 10 in any category, but was above average in all five categories.

 

Alaska

9. Alaska. Toward the end of the top 10, scores started to become more of a mixed bag, with high ratings in some categories, but a low enough score in one or more category to drag a state's ranking down. For example, Alaska had the lowest bankruptcy rate in the nation, and the second-lowest rate of credit card delinquencies. Despite that, it was let down by having a sub-par average credit score.

 

Minnesota

10. Minnesota. Like Alaska, Minnesota had excellent rankings in some categories that were pulled down by below-average performance in one aspect of credit conditions. Minnesotans have the highest average credit scores of any state in the nation, but the state is a little worse than average when it comes to foreclosure rates.

 

Picking the top 10 states for credit

How did CardRatings.com identify the top 10 states for credit health? The list considered the following five factors:

  • Average credit score (Experian, June 2011)
  • Foreclosure rates (RealtyTrac, May 2011)
  • Credit card delinquency rates (TransUnion, Q1 2011)
  • Unemployment rates (Bureau of Labor Statistics, May 2011)
  • Bankruptcy rates (American Bankruptcy Institute, Q1 2011)

States were ranked from top to bottom in each category. The rankings across all five categories were then totaled, and the top 10 states for credit were determined based on those totals.

When conditions overall are bad, people often assume that everyone is in the same boat. This list of the top 10 states for credit is a reminder that it is possible for some states--and some individuals--to do a little better about keeping debt under control. Be sure to check out CardRatings.com's companion piece 10 worst states for credit for a look at the other end of the spectrum. And for the rankings of all 50 states, see Best and worst states for credit: the complete list.

 

About the Author

arnold

Curtis Arnold, a nationally recognized consumer educator and advocate, has been educating consumers about credit cards since 1998. New! Curtis is the author of 'How You Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line' (FT Press, 2008). He is also the co-author of the upcoming Complete Idiot's Guide to Person-to-Person Lending (Alpha Books/Pengiun Group USA, April 2009), a contribitor to The Ultimate Allowance (InnerWealth Publishing, 2008) and is extensively featured in 42 RulesTM for Driving Success With Books (Super Star Press, January 2009).