So much of our financial well-being depends on our credit scores. Everything from the cost of mortgages to car payments to financing household goods is determined by our credit scores. And if your score is low, the interest rates you’ll be facing will most likely be high. While a fraction of a percent on your interest may not seem like much, it could end up costing you thousands more over time while that interest accrues.
There are many reasons why people have poor credit, including outstanding debt, poor financial management, and even credit card fraud and identity theft. Regardless of the reason, if you’re one of the roughly 30% of Americans living with bad credit, you’ll likely that it is a lengthy struggle to get your numbers up. Like it or not, many of us simply have to live with poor credit. However, where you’re living also has a big role in your financial future. RewardExpert conducted an analysis of government and public data to determine which states are the best places to live in if you have bad credit, and which ones are the worst.
The Best and Worst States to Live in with Bad Credit – and New Jersey is one of the worst places. To determine a state’s viability for those with low credit, we analyzed of five factors; life expenses, consumer friendliness of usury laws, status of debt collectors, state financial health, and complaints per capita.
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Here is a look at some of the best states to live in with poor credit:
- New Jersey earns tenth place – New Jersey is home to the seventh-most debt collectors per capita of any state in the country. It’s not a big surprise, with legal contract usury rates up to 16% and prices as high as they are. The Garden State is one of the ten most-expensive states in the country to live in and loans taken out there can be subject to pretty high interest rates.
- New York rounds out the bottom five takes– Driven primarily by its downstate, New York is one of the most expensive states in the country. With an incredibly high maximum interest rate of 16%, nearly twice the national average, it is one of the least consumer friendly states in the nation in terms of usury laws, as well.
- Washington takes first place – Prices in Washington state are sky high. In-demand real estate and schools are making mortgages and school loans extremely expensive, especially for those with credit scores on the lower end. Even worse, legal usury rates are 1.5 times the national average.
With fines of more than $10,000 for Unfair and Deceptive Acts or Practices violations and one of the lowest usury rates in the country, with a maximum interest rate of just 5.0%, The Hawkeye State is the best place in the country to live without good credit. The prices in Iowa are low too, so the loans most people are taking out aren’t all that high anyway.
Of all fifty states, Minnesota has the absolute lowest delinquency rate. With median income levels about 15% higher than average, Minnesota’s economy is strong enough to allow debtors to earn enough to pay back their loans. Also, mortgage rates are below average and so are prices.
Nebraska is an extremely financially healthy state. With unemployment sitting at 2.7%, versus the 4.1% national average, and jobs paying well, if you have bad credit, you’re more likely to have the job and the money to pay back the higher interest rate in Nebraska than most places in the country. With good jobs and resources for debtors, it’s no surprise the Cornhusker State has the fifth lowest delinquency rate in the country – which sets a good precedent for debtors with low credit.
Things are going well for North Dakotans. It’s an above-average state in terms of financial health and its residents incur less debt than just about any other state. There are few reasons for Dakotans to incur much debt. However, when debtors are in collection it’s more amicable than in most places, as the state has the 2nd fewest number of complaints registered to the Consumer Financial Protection Bureau.
Wisconsin has remarkable financial health, with the 7th highest credit score of any state and the 4th and 14th lowest credit card and mortgage debts in the country. The state has provided citizens with plenty of resources for dealing with debt.
Overall, Arkansas is of the cheapest places to live in the country. The Razorback State has the sixth-lowest average home price in the country and, with mortgage loans being one of the nation’s largest debt drivers, Arkansas isn’t a bad place for those with low credit. On top of that, Arkansas has the second-lowest cost of living in the US, giving even debt-strapped Arkansans financial relief during their day-to-day.
Kansas is a solid state for those with poor credit. It’s a generally inexpensive state operators in the debt collection industry in it generate fairly few complaints for harassing debtors. Even Kansans with debt in collection can expect a pretty smooth experience. Also, things are looking up financially in the state, as average incomes have risen every year over the past five years and are projected to continue on the upswing.
The Mountaineer State receives the least complaints for illegal debt collection of any state in the country. It also is home to the cheapest houses in the country and lowest house price growth in the nation. These trends have led it to least mortgage debt in the country. The only thing keeping West Virginia from being even higher on the list is that it’s ranked second-to-last in terms of financial health.
By a fairly large margin, Wyoming has the lowest in-state tuition in the country. Educational loans are a common strain for those with poor credit and low tuition rates are helpful in that capacity. Additionally, specific licensure is required to collect debt in Wyoming, which has led to a low density of debt collectors in the state. However, average income levels, according to the Bureau of Labor Statistics, have nearly stagnated over the last five years.
The Sooner State caps interest rates at a maximum of 6.0%,e giving it a solid basis for those with low credit scores. However, the fourth and 16th lowest home and tuition prices, respectively, make Oklahoma a great place for that cohort.
The 10 Worst States to Live in With Bad Credit
Prices in Washington state are sky high. In-demand real estate and schools are making mortgages and school loans extremely expensive, especially for those with credit scores on the lower end. Even worse, legal usury rates are 1.5 times the national average. It’ll cost you; there aren’t many restrictions capping rates and weak state-specific laws against predatory lending.
Just about everything about the state makes Tennessee a tough place for people with bad credit. Price rises are slowing, but that’s just about the only thing the Volunteer State has going for it for those with low credit, ranking in the bottom half of every other category and serving up a maximum legal interest rate in the double digits.
Home and tuition prices are high, at 41st and 43rd in the country. Judgment loan rates are capped relatively well, at 12.75%, but South Carolina is pretty easy on payday and predatory lenders and the 8.75% maximum legal interest rate is above average – neither of which are doing those with low credit any favors.
Georgia has the 48th lowest average credit score statewide, according to TransUnion. Georgia’s a state with pretty poor history with credit, leading to the second-highest illegal debt collection complaint volume of any state in the nation. Also, the state has one of the highest maximum judgement usury rates, 30% higher than the national level. A person with poor credit is likely to take on higher interest rates and more debt, so higher maximum usury rates are unfriendly for consumers.
The highest average home prices in the nation are found in Florida. Normally, such a high starting point would discourage high growth rates, but Florida home prices are still growing at one of the fastest rates in the nation. There are a high amount of collectors located in the state to capitalize on the state’s high mortgage payment delinquency. Also, Florida is more lax than most states when it comes to extremely consumer unfriendly payday loans.
Driven primarily by its downstate, New York is one of the most expensive states in the country. When consumers with poor credit take out loans, they’re often financing a purchase with a higher price point. With an incredibly high maximum interest rate of 16%, nearly twice the national average, it is one of the least consumer friendly states in the nation in terms of usury laws, as well. The only thing keeping New York from sliding further down the list is that it requires high scrutiny for debt collection licensure and it’s quite financially healthy.
Everything’s bigger in Texas. That includes the amount of debt collectors rolling around and the amount of interest you’re allowed to pay on a loan. The Lone Star State is a place on the rise, financially, and job and wage growth are on the way up. However, with judgement usury rates as high as 18%, it’s a still not a great spot to be for those with low credit.
It might not have the reputation as one, but Oregon is an expensive state. Home prices are rising at the sixth highest rate in the country and it also clocks in at number six in terms of highest cost of living. The number of debt collectors growing quickly and this influx has led to a fairly high level of debt related complaints to the CFPB, as well.
The Golden State is the second-most expensive state in the country, after Hawaii. It has the second-highest priced homes in the country and in order to purchase these homes, Californians have taken on more average mortgage debt than any other state’s residents. The state also doesn’t require specific licensure for debt collection and there are more debt collectors in California than any other state.
New Jersey is home to the seventh-most debt collectors per capita of any state in the country. It’s not a big surprise, with legal contract usury rates up to 16% and prices as high as they are. The Garden State is one of the ten most-expensive states in the country to live in and loans taken out there can be subject to pretty high interest rates. There are bright spots, as housing price growth isn’t as high as many other states and it has a relatively healthy financial profile, but for the most part, New Jersey isn’t a great place for people with poor credit.