DebtFreeGuru.com's - Tip of the Week - Monday, July 4, 2005
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Where the Big Borrowers Live
People in New Hampshire owe twice as much in credit-card debt, car loans
and the like as those in Oklahoma. How do your state's debtors stack up?
By
Hilary Smith (As Seen on MSN)
There’s something about New England that makes people spend, spend,
spend.
According to data compiled from approximately 3 million consumers by
credit-reporting agency Experian, New Hampshire, Connecticut and Rhode
Island have the highest average overall debt in the nation. As of March,
the average debt for people living in these states totaled $16,845,
$15,314 and $14,643, respectively. Massachusetts, Maine and Delaware
followed closely behind.
Experian classifies debt as everything present on
a credit report, including revolving and most installment debt.
Revolving debt includes money you would owe on standard bank and
retail-store credit cards, where the creditor sets your monthly payment
based on the current balance. Installment debt is money you would owe to
a creditor who expects repayment over a set period of time in equal
monthly amounts, such as a car loan.
Experian’s
data exclude mortgages.
At the bottom of the list with the least amount of debt are people
living in Mississippi, Washington, D.C., and Oklahoma. Their state debt
averages came in at roughly half those of the more northerly states at
$8,420, $8,655 and $8,823, respectively.
So where does your state rank? Check out our interactive debt map to find out.
Debt Peaks in Middle
Age
Nationwide, the 50-59 age group had the highest average debt with
$20,157, while the over-70 group held the lowest average debt with
$6,500, Experian said.
“The numbers follow a sensible cycle,” says Samah Haggag, manager of
analytics for Experian. “As our age increases, people are out making
purchases and building their lifestyle. Debt increases gradually over
time and tapers off when they hit retirement age. This is what we were
expecting to see.”
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Average debt by age group in the U.S. |
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Source:
Experian (www.NationalScoreIndex.com)
In New England and other areas, particularly on the coasts, Haggag
speculates that higher costs of living are a significant contributing
factor to the higher debt loads, as compared to debt loads in the South
and Midwest.
According to CardWeb.com, which tracks the credit and debit card
industry, average U.S. credit-card debt per household nearly tripled
over a 10-year period, from $3,646 in 1993 to $9,205 in 2003 (the most
recent data available).
Low
mortgage rates and the ever-increasing availability of credit also are
making it easier for consumers to spend now and pay later, especially on
items that many once considered only rare luxuries. The Federal Reserve
reports that Americans spend half their money from refinancing on
expenses such as vacations and home improvements.
Large
Debt not a Credit-Killer
Don’t be too quick to condemn the heavily indebted, however. Carrying
around a hefty debt load does not necessarily equate to a bad credit
score. Haggag notes that consumers who have higher-than-average debt
also have better-than-average credit scores. These consumers often have
more access to credit, increasing their opportunities to incur more
debt.
For example, Experian found that consumers in Massachusetts have the
fourth-highest overall average debt load at $14,601, but they also have
the fifth-highest average credit score at 702, just a few points behind
top-ranking South Dakota.
“Just because someone has a large amount of debt doesn’t mean they will
have a low credit score,” she says. “Managing debt is crucial to earning
and maintaining a good credit score.”
DebtFreeGuru.com - Tip of the Week - Monday, July 4, 2005
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