While credit scores can be vary wildly from person to person, jumping high and falling low depending on things like socioeconomic status and level of financial literacy, studies have shown certain towns and cities are home to some of the lowest credit scores in the state. At the top of the list constructed by Experian, with an average score of 612, is Greenwood, Mississippi. Mississippi is also the state with the lowest credit score — the average score statewide sits at 614.
But why do residents in Greenwood, Mississippi have such credit woes while residents of Mankato, Minnesota, for example, have an average score of 706?
It’s Not About the Amount of Debt You Carry
Let’s take a look at a few numbers from the Experian study:
- Average credit card balance: $3,473
- Revolving credit utilization percentage: 24%
- Number of late payments: .20
- Average credit card balance: $3,586
- Revolving credit utilization percentage: 36%
- Number of late payments: 0.73
Many people believe credit scores are directly impacted by the amount of debt you carry. If you carry more credit card debt, for instance, your credit score will suffer — but that’s not necessarily the case.
Your credit score is a direct reflection of how you manage your credit — if you keep your balances lower than your available credit, if you make on-time payments, if you limit the amount of times you apply for new credit, etc.
So while the average credit card balance between Mankato, Minnesota and Greenwood, Mississippi is strikingly close, the differences lie in the amount of credit being utilized and the number of late payments. A credit utilization percentage of 36% is higher than most would recommend and the number of late payments in Greenwood is almost four times that in Mankato.
Outside Factors and Their Impact on Credit Scores
Getting to the root of credit score issues can start in three key areas: unemployment, education, and income.
In the area of unemployment these two cities have two very different stories to tell — Mankato is sitting at 3.1% while Greenwood is at 10.9%. Without stable employment, late payments become more common and credit scores begin to suffer.
In addition, in Mankato 45% of adults have some form of higher education, while in Greenwood that number is at 23%. This in turn translates to lower incomes — the average household income in Greenwood is around $28,000 making it a challenge to keep up with financial obligations.
The good news is, credit doesn’t have to be a direct reflection of these factors.
5 Ways for Residents of Greenwood, Mississippi to Improve Their Credit Score
Whether you’re living in Greenwood or Mankato, you can take control of your credit score by employing these tips.
1. Keep credit utilization below 30%
It might seem deceiving, but using the amount of credit extended to you by credit card companies is a sure-fire way to damage your credit score. Credit scoring agencies and potential lenders look to see how far extended you are in terms of your monthly debt obligations and determine your credit worthiness accordingly.
2. Make on-time payments
Your payment history makes up a whopping 30% of your credit score, so every late payment counts. Staying on top of your credit obligations will ensure your score remains in tact and you look like a good candidate when you go to apply for a loan or new credit account down the road.
3. Limit the number of new credit accounts you apply for
You might be approved for new credit, but that doesn’t mean it won’t tarnish your score. Your credit score can drop with hard credit inquiries — the type of inquiries companies must run if you are applying for a new credit card, for instance. Keep these limited for this reason, but also to ensure you aren’t taking on more debt than you can handle.
4. Seek help when necessary
If you know you’re over your head and not in a position to fix your credit score and financial situation on your own, consider reaching out to a Mississippi licensed credit counseling organization able to help you create a debt payoff plan and get you back on track to financial solvency and a better credit score.
5. Stay on top of your credit report
Just because something makes it onto your credit report doesn’t mean it’s accurate. You are entitled to one free credit report annually from each of the three credit reporting agencies — TransUnion, Experian, Equifax. Stay on top of these to ensure nothing is blemishing your credit that doesn’t belong there in the first place.