Experian's State of Credit report reveals consumers in cities hardest hit by recession show encouraging signs of financial recovery

COSTA MESA, Calif., Sept. 17, 2012 /PRNewswire/ -- Have the recession and the last years of sluggish recovery made consumers tighten their belts and reduce debt? Has this contributed to an improvement in credit scores? How have small businesses weathered the storm? Most importantly, how can consumers continue to improve and build their credit health and live credit smart?

These are questions that drove Experian's third annual State of Credit report, an analysis of consumers' average credit scores, average debt levels and average credit utilization in more than 100 U.S. cities. For the first time, Experian® analyzed business credit scores and other business data to evaluate how small businesses, which are dependent on consumer spending, are faring in this time of slow economic growth. Experian, a leading global information services company, revealed the results today.

Ranking the cities

Below is a snapshot of the 10 cities with the highest and lowest average VantageScore®, an industry-leading consumer credit risk score. Scores range from 501 to 990, with higher scores representing a lower likelihood of risk. Scores are rounded to the nearest whole number.

To provide additional context how business credit scores align in each of the top and bottom ranked cities, the charts include a correlating Experian business credit score, which predicts the likelihood of a business becoming severely delinquent (91 days or more past due) within the next 12 months. Unlike consumer credit scores, business credit scores are based on a scale of 1 to 100. (Note: These cities are only ranked for VantageScore, not business credit score.)

See the charts below for the rankings:

Summary of Experian State of Credit findings

Consumers

• Minneapolis took the number one spot, with an average VantageScore of 787
• The national average VantageScore improved for the second consecutive year; it is up to 750 from last year's average of 749
• Once again, the Midwest dominated the top 10 spots in the rankings, and Wisconsin consumers continue to show solid credit health, with four of the state's metropolitan areas making the top 10 list for the second year in a row
• In the South, seven out of 10 cities improved their consumer credit scores
• Las Vegas, Bakersfield and Phoenix made the list of the 10 cities showing the largest percentage increases in their scores
• Harlingen has the lowest average score, at 688

Small businesses

• The national average business credit score is 55 (down 4.4 percent from 57.5 last year)
• There was a 4.4 percent decrease in the number of business bankruptcies nationally over the past year
• There was an 11.3 percent increase in the number of new businesses established nationally over last year
• Las Vegas, one of the cities with the greatest improvements in consumer scores over last year, also saw:
  • A dramatic 64.4 percent increase in the number of newly established businesses
  • A decrease of 10.5 percent in its number of business bankruptcies
  • A 9.2 percent improvement in its business credit score
• In the South, while seven out of 10 cities showed improvements in their consumer credit scores, only one city, El Paso, increased its business credit score this year

For more information on the national, regional, state and city trends, view the fact sheet.

"Increasing numbers of Americans are showing they understand how credit works. They're paying their bills on time and lowering their debt-to-limit ratio," said Maxine Sweet, Experian vice president of public education. "It's encouraging to see them demonstrating that they have the resources to make those positive changes in how they manage credit. They are choosing to 'Live Credit Smart'."

Additional data resources

• More details from the analysis — including an interactive map, an infographic, a fact sheet and statistics for more than 100 U.S. cities — are available at Experian's http://www.LiveCreditSmart.com
• Experian will host an interactive #CreditSmart tweet chat with consumer credit experts Maxine Sweet and Rod Griffin on Thursday, Sept. 20, from 11 a.m. to 12 p.m. Pacific time hosted by @Experian_US
• Some of America's most trusted and widely read personal finance journalists and bloggers will be contributing their favorite frugal living tips on the Experian news blog on Tuesday, Sept. 18, and Thursday, Sept. 20   
• More business health information is available via an interactive map at Experian's http://www.Experian.com/B2B

"The 2012 State of Credit confirms another year of incremental gains on the part of consumers, yet with a national average score of 750, which is just that — average — we have room to improve," said Gail Cunningham, vice president of membership and public relations at the National Foundation for Credit Counseling, the nation's largest financial counseling organization. "Widespread financial education is the key to helping more Americans manage their credit well as they regain their economic footing."

Analysis methodology

The consumer analysis is based on a statistically relevant sampling of Experian's consumer credit database. Analyzed credit files did not contain personal identification information. Credit scores for the State of Credit report are based on the average VantageScore by designated market area from January through June 2012. The business analysis is based on a statistically relevant sample of Experian's business credit database, containing third-party-verified information on 99.9 percent of all U.S. companies across all industries.

About the Experian State of Credit report

The State of Credit is a comprehensive analysis of consumer credit trends, including average credit scores, debt and credit utilization in more than 100 U.S. cities, ranking the cities with the highest and lowest credit scores. The localized statistics help gauge how consumers across the country are progressing with managing credit and how they compare with their neighboring cities. For the first time, Experian also analyzed how small businesses are doing since most local small businesses are dependent on local consumer spending.

About credit scores

Consumer credit scoring translates the information in an individual's credit report into a simple number that is one factor lenders use to evaluate the probability of default within 24 months, an important factor lenders consider when extending credit. Not only does a credit score make a difference when it comes to gaining access to credit, but it also affects the interest rate a consumer pays when borrowing. Thus, a good credit score yields financial benefits to consumers over the long term. Business credit scores are a percentile-based ranking of the likelihood that a business will become severely delinquent (91 days or more past due) within the next 12 months. 

About VantageScore

VantageScore, which is used by lenders and is available to consumers, is the first credit score developed cooperatively by Experian and the other national credit reporting companies. With VantageScore, consumer scores fall within a range of 501 to 990 and the scale also approximates the familiar academic scale, making it simple to associate your VantageScore number with a letter grade. For more information, visit http://www.experian.com/consumer-products/vantage-score.html.

About Experian

Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.

Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2012 was US$4.5 billion. Experian employs approximately 17,000 people in 44 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and Sao Paulo, Brazil.

For more information, visit http://www.experianplc.com.

VantageScore® is owned by VantageScore Solutions, LLC.

Experian and the Experian marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the property of their respective owners.

SOURCE Experian