NH, other New England states fare well in credit report cards
By PAT HAMMOND
Sunday News Staff
The best-in-the nation credit profiles of folks who live in northern New England states can be attributed in part to “Yankee frugality” says the president of the New Hampshire Bankers Association, but he warns that even the thrifty need to take care lest they become spendthrifts.
“People in the three northern states ( Maine, New Hampshire and Vermont ) are smart in the way they use credit and they save for a rainy day,” Gerald H. Little said. “It leads to credit profiles that are better than the nation's, but people are still probably a little bit too lax.
“We're in an ‘I've-gotta-have-it-now' society with a Jet Ski and two cars in every driveway,” Little said.
“I'm glad to hear the experts who trace profiles say New Hampshire is in good condition regarding its credit. At the same time,” Little said, “we have to keep an eye on the percentage of debt - that is, the debt to income ratio. We need to make sure people's debt loads are reasonable in the context of their anticipated annual income.”
Sophie Beckmann, a CPA and certified financial planner at A.G. Edwards in St. Louis, Mo., provided the following recommendations.
- Aggregate debt (includes monthly payments on credit card, mortgage, automobile and all other loans) should not exceed 36 percent of one's gross monthly income.
- Mortgage costs should not exceed 28 percent of gross income.
- Credit card and automobile loan payments together should not exceed 20 percent of net income.
Heather Greer, spokesman for Experian, a company that administers information on, among other things, credit, said, “The New England area consistently does well managing its scores.
“New Hampshire, Massachusetts and Vermont tend to have the highest scores in the nation,” Greer said.
New Hampshire had the sixth highest average credit score in the nation for the month of June, the most recent month for which data is available. New Hampshire is preceded by South Dakota, Minnesota, Vermont, North Dakota and Massachusetts, Experian data reveal.
New Hampshire 's score of 705 may be meaningless to the layman, but Greer said the potential range of scores is from 330 to 830, with a national average of 678.
The scores are determined by a formula consisting of factors such as debt level, how much available credit the consumers are using, how many credit cards they have, how many late payments, and how many credit applications they have filed. (For more on this, see The Sunday Explainer on Page A2.) Lenders use this information to evaluate the level of each consumer's risk.
What we charge
A look at the scores for June, as reported by Experian, paints a profile of the New Hampshire credit card user.
Debt level: New Hampshire credit consumers averaged $17,021 of debt in June, the highest level in the nation. The figure includes not only credit card balances but installment loans, too, though not mortgages. The average for the nation was $11,497.
A high level of debt doesn't necessarily signify a poor credit score. A consumer may well be reducing the debt with regular payments or with the use of revolving credit.
Credit usage: New Hampshire consumers' credit usage in June was 27.1 percent, and the national average was 23.8 percent. This refers to the percentage of the consumers' available credit that they are using.
Monthly minimums: The average minimum monthly payment by a New Hampshire consumer was $655 for June, well above the national average of $512. The number reflects the amount the consumer must pay in order to meet his minimum obligations on credit cards and loans, but does not include expenses for real estate loans, rent, utilities, insurance, utilities and the like.
Open cards: The average number of open credit cards for New Hampshire was 3.8, as opposed to a national average of 3.1. New Hampshire consumers have one more credit card than consumers as a whole.
Late payments: New Hampshire scores a 0.67, which represents the number of accounts that are past due by at least one payment. The national average is 0.89. The worst states - Texas, Louisiana, Oklahoma and Arkansas - averaged 1.26 accounts past due.
Credit inquiries: The average number of credit inquiries for New Hampshire in June was 2.2, and the average was 2.3 for the nation as a whole. This represents the average number of credit reports requested by lenders within the last two years for loan applications.
“Don't apply for a bunch of credit in a short period of time because it looks like you are more risky,” Greer said. “With New Hampshire being lower than the national average, it's working for them.”
Credit vs. debt
New Hampshire deputy commissioner of banking Robert A. Fleury examined the Experian data during an interview with the Sunday News. The Banking Commission regulates the 21 FDIC-insured banking institutions with principal offices in New Hampshire and the state's credit unions.
“As to New Hampshire scoring as having the highest debt,” Fleury said, “that's not all bad. If you used a debit card all the time you would have a low credit score. The credit score is an industry tool,” Fleury said, “to say if you are a good risk.
“Multiple cards and maxed-out cards have a negative impact,” Fleury said, but added, “You have a lot of people who use a lot of revolving debt, keeping up payments and not being maxed out.
He also points out that “The score is not for you, the consumer. It's for the industry, to determine if you are a good risk. If you pay up your credit cards in full every month, they don't want you.”
That, of course, is because you're not paying any interest - a key source of the card issuer's revenue.
Return to Bad Credit Mortgage Articles |
