Credit scores are a three-digit number that can benefit or hurt your access to loans and big purchases— and recent reports have shown that credit scores tend to be lower in southern states.
“Typically, Arkansas, Texas, Georgia, Tennessee, they have some of the lowest scores across the board in the nation,” said Michael Pakko, an economist.
According to Experian, the average credit score in the U.S. is a 714-FICO score. Arkansas ranks in the bottom 10 when looking at credit score averages by state. The Natural State falls to number 44, with a reported average score of 694 in 2022.
“In 2019, the average credit score in Arkansas was 683,” Pakko said. “In 2021, it was up to 694 and it looks like it stayed there for 2022.”
The low credit scores in Arkansas are mirrored by most of its southern neighbors too. All of Arkansas’ border states, except Missouri, rank in the bottom 10 of lowest average credit scores.
Oklahoma, Texas, Louisiana, and Mississippi each have an average score below 700. Pakko said that the lines are clear.
“If you look at credit scores by state, they don’t vary all that much and we’re talking about averages here, but there is clearly a tendency for lower credit scores in the south,” Pakko explained.
It doesn’t stop with Arkansas’ neighbors, a map from the Washington Post shows from east to west, the United States’ southern region has overwhelmingly lower average credit scores.
Financial Consultant Darryl Callum pointed to three possibilities as to why this trend could be happening.
“Number one is a lack of education, not being taught financial literacy in school,” Callum said. “So, if you’re not educated on how to maximize your credit, there’s no way to optimize it.”
Callum’s other two possible reasons are poor money management and a lack of cash flow.
“Typically, in the southern states, people get paid a lot less,” Callum described. “So, people don’t really have the money to pay bills on time or at all in a sense. That’s why credit scores can take a tank.”
If credit scores drop, there are steps to repair them.
“Credit repair basically comes down to two main things, removing the negative items and building with positive items,” Callum explained.
Callum added that credit repair can come through avenues you may not think about.
“It’s crazy our rent is typically the biggest bill that you have, but you don’t get any credit for it on your credit report,” Callum said. “However, a rent reporting agency actually helps report rent payments on a credit profile that can increase someone’s score as well.”
Pakko wanted credit card users to keep in mind that credit reporting agencies and credit card companies are mainly worried about one thing.
“Credit card companies are looking for, most importantly, paying on time, on a regular basis,” Pakko explained.
The other way to improve credit scores Callum mentioned is by removing negative items from one’s credit report— and there are laws in place to do it.
According to Callum, credit reporting agencies are highly regulated by Congress, and parts of the ‘Fair Credit Reporting Act’ are structured to give people rights.
“We can leverage these laws to get negative items removed from credit reports because per the Fair Credit Reporting Act, everything that’s reported on your credit profile has to be reported 100% accurately across the board,” Callum explained. “If there’s any inaccuracy whatsoever, by law, it has to be removed.”
As a financial consultant, Callum does a detailed analysis of how negative items are reported on someone’s credit report.
“Then I’ll be able to process the appropriate paperwork to challenge those negative items,” Callum said.
A final piece of advice from Callum is if someone wants to start the credit repair process, they should ask and look for the following three things in a consultant.
The consultant should be able to explain the ‘Fair Credit Reporting Act’ and other relative laws, they should not over-exaggerates expectations, and make sure to ask for their results from past clients.
Callum added that becoming an authorized user on a friend or family member’s credit card is another way to boost a credit score.