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State Debt vs. Consumer Credit Scores

Posted in Credit Markets, Debt Markets, United States by teslik on May 20, 2010

I came across an interesting chart mapping average consumer credit scores by U.S. state. See below. The darker the green, the better the credit scores of consumers:

Figure 1: Average Consumer Credit Scores by State

I compared this chart to another one mapping overall state debt per capita. What struck me as most interesting about the two charts is the odd, bifurcated correlation between them. Having a high level of state debt seems to correspond with having extreme credit scores—on both extremes. Some states with high debt levels have extremely prudent consumers with high credit scores. Some have consumers with extremely low scores. Virtually none have “average” consumers.

For instance, New York (average credit score 676), California (681) and Illinois (681) are among a handful of states with the highest average credit ratings in the country. The national average, at 664, is well below the averages in any of these states. But look at the chart below. California, New York and Illinois are also among the states with the highest state government debt.

Figure 2: State Government Debt Per-Capita

Four other states—Wisconsin, New Jersey, Connecticut and Massachusetts—exhibit the same pattern of high average personal credit scores plus a high level of state debt. But the other states with high per-capita state debt levels display precisely the opposite pattern—extremely low average credit ratings.  Note, for instance, Louisiana and Mississippi. There is only one state in the middle ground: Ohio, which has very high state debt but where average credit scores, at 658, are roughly the national average.

I’m curious for thoughts about this discrepancy. I don’t see why state government spending should necessarily have a positive correlation to personal debt levels or personal credit scores, but neither do I see any reason why it should be inversely correlated. It’s interesting, and perhaps revelatory, that the high-debt/high-scores states tend to be those with big cities. But does anyone have thoughts on why high state debt might correlate to both extremes?

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