It's no fun having a bad credit score. You pay higher interest rates for your credit – if you can get credit at all. You have little room for financial error. A small, unexpected bill can cause big problems.
At least your hardships may not be as bad if you live in certain states.
RewardExpert, a site that helps users optimize credit and debit card reward programs, examined factors that affect residents with poor credit – such as typical expenses, usury laws to limit predatory lending, and the status of debt collectors – and how those factors vary in each state.
Where is bad credit more tolerable? Consumers with bad credit should avoid the coasts and stick to the Midwest – not surprising, given the typically high costs of living in coastal areas.
Here are the top ten states to live in when your credit score is low.
Best states for low credit scores
Best states for low credit scores
1. Iowa – Iowa tops the list by doing well in all categories. Iowa is tied for the lowest maximum usury interest rate (currently less than 5%) and had the third-lowest number of complaints per capita with the Consumer Financial Protection Bureau (CFPB). Hawkeye state residents also have a low cost of living with reasonable household incomes.
2. Minnesota – Minnesota has the lowest delinquency rate and a strong economy. An average household income of over $80,000 combined with a low cost of living makes it more likely that consumers with poor credit can earn enough to stay ahead of bills.
3. Nebraska – Nebraska's story is like Minnesota's, with a slightly higher delinquency rate and cost of living. The strong state economy and low unemployment show low risk to creditors.
4. North Dakota – The overall debt load of North Dakotans is low, and those who do incur debt, seem to handle it well. North Dakota trails only West Virginia in the fewest number of CFPB complaints per capita.
5. Wisconsin – Good state financial health, low credit card debts, and relatively high credit scores help Badger State residents overcome a relatively high cost of living.
6. Arkansas – Welcome to Arkansas, where the cost of living is one of the lowest in the nation – including low home prices. Maximum usury rates are a tolerable 6%.
7. Kansas – Kansas doesn't top any category, but it does reasonably well in all. The Sunflower State has one of the better household incomes compared to the cost of living.
8. West Virginia – As noted above, West Virginia has the fewest number of complaints lodged with the CFPB. Housing prices are the lowest in the nation, keeping overall mortgage debt under control.
9. Wyoming – Certain costs are quite low in Wyoming, especially tuition costs. Given that student loan debt is second only to mortgage debt in America – and debt collectors are few – Wyoming makes it into the top ten.
10. Oklahoma – There are many debt collectors in Oklahoma, but the cost of living is relatively low, and the maximum usury rate is 6% – making debt manageable for most Oklahomans.
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If you are struggling with debt in one of these states, remember that things could be worse – you could be living in one of the ten worst states for bad credit.
Regardless of where you live, take steps to improve your credit score. Pay all your bills on time and control your spending to keep your debt load down. When you have bad credit, it's imperative to keep your balance down and patiently chip away at debt with on-time payments. Your credit score will improve – eventually.