Top 10 U.S. States With the Highest Percentage of Residents in Debt


Did you take out student loans? Do you own a home? Do you have unpaid bills that have gone to collections? Do you have a balance on your credit card?

If you’ve answered “yes” to any of these four questions, chances are you’re in debt of some kind. Debt isn’t necessarily a bad thing. For instance, mortgages and students loans are essential for the majority of Americans in order to get the education required to make other dreams (like owning a home) a necessity. However, maxing out credit cards, bills going to collections, and bankruptcies and foreclosures aren’t good things to have on your record.

When it comes to debt, however, you’re hardly alone – and debt varies on a state-by-state basis. If you live in Minnesota or either of the Dakotas, for instance, you live in a state where the fewest percentage of Americans are in debt. Elsewhere around the nation, it’s a different story. That said, here’s a closer look at the top 10 states with the highest percentage of Americans in debt.

Top 10 States According to Residents in Debt

The following data is based on a December 2017 report from Forbesaccording to data tracked in 2016:

  1. Louisiana: Louisiana leads the nation in this category, as nearly half of its residents (46 percent) are in debt.
  2. Texas: Just slightly behind Louisiana, about 44 percent of all residents of the Lonestar State are in debt.
  3. South Carolina: 43 percent of all South Carolinians are in debt.
  4. West Virginia: 42 percent of West Virginia residents are in debt.
  5. Nevada: Nevada rounds out the top five, with 41 percent of its residents in debt.
  6. Alabama, Georgia, Kentucky, Mississippi, New Mexico: Though this is a top 10 list, the five states of Alabama, Georgia, Kentucky, Mississippi and New Mexico all tie for sixth place, with about 40 percent of residents, respectively, in debt.

Most Indebted States (By Value)

While the following list considers the percentage of residents in debt, we figured it would be noteworthy to include a separate list of the states where residents are the most indebted. Perhaps not surprisingly, the wealthiest states in the nation tend to lead this list because they’re buying more expensive properties, cars, etc. Unlike the list above, this one isn’t necessarily a bad list – just so long as the residents keep up with their payments in paying down debt owed. Here’s a look:

  1. California: With all that Hollywood glitz and glam, and high coastal property values, the average California resident is in debt at just over $336,000.
  2. Hawaii: Everything is more expensive in Hawaii, which is why the average resident is in the hole about $321,000.
  3. Maryland: The average Maryland resident is about $263,500 in debt.
  4. New Jersey: Though a bit surprising, the average New Jersey resident is some $257,500 in debt.
  5. Washington: Rounding out the top five is Washington, where the average residents is $243,800

Tax Liens, Judgments Could Be Omitted from Credit Reports in Near Future

For tax liens The Consumer Financial Protection Bureau (CFPB) has been winning a lot of battles for the people lately. Aside from socking Equifax and TransUnion with fines for deceiving consumers back in January. More recently, it hit Experian with a $3 million fine for the same thing in March. Now, it’s recently championed an effort to change the way tax liens and judgments are reported on your credit record. It’s a major shakeup when it comes to credit reporting.

Specifically, per a report in the Wall Street Journal, Experian, Equifax and TransUnion – the three major credit reporting agencies – will soon be readjusting their respective credit reporting models to omit tax liens and judgments. It’s a move that could help out millions of Americans when it comes taking control of their finances in the future.

What This Means

This move looks to help out millions of consumers and could very well raise the overall average credit score nationwide. This news is especially significant when you consider how crippling tax liens and judgments currently are to most consumers. Presently, tax liens and judgments, even if they’ve been resolved, can stay on a credit report for up to 10 years. That’s right, even if they’ve been paid off, a consumer’s best bet is to get it released and then petition the credit agencies to remove it from their record to avoid extensive credit repair.

Unresolved liens and judgments stay on a credit report for 15 years.

To be fair, there’s still some things that we don’t yet know when it comes to this news. For instance, will consumers have to petition the agencies to have liens and judgments removed? Or will the agencies perform this automatically? That’s an unknown. What’s not an unknown, however, is how positive a move like this can be for consumers.

Not Everyone’s Happy About It

While consumers should be welcoming this news, not everyone is happy about it. For instance, this report is putting lenders a little bit on edge. Why? Simple – it provides less data for them to assess consumer risk. When lenders make the decision on whether or not to approve a loan, it becomes a question largely of how reliable of a consumer they’re working with. A tax lien or judgment on one’s credit report would certainly factor into their decision, and being that it can take up to 15 years for such to be removed from an individual’s credit report, it provides lenders with more of a comprehensive history of consumer behavior. This news, obviously, alters that, giving lenders one less thing to ultimately analyze. In a worst-case-scenario situation, it could wind up burning a lender in the long run.

Mortgages That Require a Zero Down Payment

One of the main prohibiting factors from more people being able to buy homes is the issue of the down payment. Yes, even if a consumer has a terrific credit score, a good job that would provide the income necessary to make monthly mortgage payments and the desire to be a homeowner, there’s that all-important issue of the down payment. Putting 20 percent down, as is the case with a conventional mortgage, isn’t feasible for many buyers – and even low down payment options, such as the 3.5 percent that’s the minimum requirement with FHA loans, can be a stretch for cash-strapped consumers.

The good news is that more and more lenders are taking note of these challenges that many consumers face, especially when trying to acquire property in expensive housing areas such as San Francisco, for instance. This post is designed to take a look at some of these zero-down and minimal down payment options that are now available.

Zero Down Payment Mortgages

Perhaps the most common zero-down mortgage is none other than the VA loan. However, the big difference between this type of home loan and others on this list is that in order to qualify for it, you have to either be a veteran or an active-duty service member. VA loan qualifiers will, however, have to pay a funding fee, usually of anywhere from 1.5 to 3.3 percent, which can be rolled into the loan itself. Another popular zero-down military loan is that of which is offered by Navy Federal. However, unlike VA loans, Navy Federal’s funding fee is lower at a constant 1.75 percent.

Here’s a look at some other zero-down home loans:

  • USDA Rural Development Mortgage: As the name implies, the zero-down loan is applicable to buyers that are purchasing qualified properties. But unlike what many may think, these areas that qualify aren’t all considered textbook “rural.” In lieu of a down payment, USDA Rural Development loans require an upfront 2 percent loan guarantee fee and a 0.5 percent annual fee that’s based on the current loan balance. Both can be rolled into the mortgage. One other thing to note about this loan, however, is that it is very popular and funds dedicated to it are known to be depleted well before the end of the year.
  • San Francisco Federal Credit Union POPPYLOAN: Announced in December of 2015, this geographically-specific offering from the San Francisco Federal Credit Union offers zero-down financing on home loans up to $2 million as a means of helping qualified buyers navigate the expensive Bay Area real estate market. In order the qualify for these POPPYLOANs, San Francisco-area buyers must be at least 18 year old and be purchasing a single-family home or condo, or a multi-family home that is intended to serve as their primary residence.
  • BBVA Compass: In February of 2015, BBVA Compass launched its HOME zero-down loan option. HOME, which stands for “home ownership made easier,” is offered only on properties that are in low- to medium-income areas, per Census designation. The HOME loans will also help buyers cover up to $4,500 of their closing costs.
  • NASA Federal Credit Union: NASA Federal Credit Union also offers a zero-down, fixed-rate mortgage that doesn’t require the purchase of private mortgage insurance. It’s available to qualified buyers on either a new home purchase or a refinance on mortgages up to $650,000.

Minimal Down Payment Mortgages

As we noted in the opening, homeownership isn’t so much about what your down payment is – but whether or not you can make the monthly mortgage payments over the course of the 15- or 30-year loan term. But for those that want to put some sort of amount down – even if it is minimal – there are low down payment options available. And several of these options are much less than the 3.5 percent minimum required with an FHA loan and the 3 percent down payments that many other lenders have begun to offer. Here’s a look:

  • Guaranteed Rate: As of July 2016, Guaranteed Rate offers loans with 1 percent down payments to nationwide consumers. The specific mortgage program is known as “Double Match,” and in order to qualify for the program, buyers need to have at least a 680 FICO score and be purchasing a home that is $417,000 or less.
  • Quicken Loans: In late 2015, Quicken Loans debuted a 1 percent down payment mortgage of its own for consumers buying homes (no refinances). To qualify, consumers must hold a credit score of at least 680 and have a debt-to-income ratio of 45 percent or less.
  • United Wholesale Mortgage: Around the same time that Guaranteed Rate introduced its Double Match 1 percent down mortgage, United Wholesale Mortgage came out with a low down payment option of its own. Dubbed an alternative to the 3 percent low down payment mortgages that are becoming increasingly popular, the buyer is only on the hook for a 1 percent down payment, while the lender will pay 2 percent, thereby giving buyers 3 percent equity come closing. To qualify, consumers must have at least a 700 FICO score and a debt-to-income ratio of no greater than 43 percent.

Alternative Credit Scoring Models

Let’s say for a moment that you presently qualify to purchase a home. You’ve got a good job with substantial income, you’ve got more than enough for a down payment in savings and you have little to no current debt. The one thing that’s holding you back, however, is your FICO score.

Many would-be homeowners and many consumers in general run into this sort of conundrum every day – they’re otherwise ideal consumers if not for a past credit mistake that is still lingering. And in many cases, it’s these mistakes that are causing mortgage applications to either be denied or accepted with high interest rates.

The good news is that this could soon be changing when it comes to the mortgage lending process, as there’s been a recent push for government-sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac, to consider alternative scoring models.

Alternative Scoring Models

Back in December of 2015, legislators introduced a bill in the U.S. House of Representatives that would permit Fannie Mae and Freddie Mac to use credit scoring methods aside from the FICO score when it comes to loan purchasing. The idea behind the bill is similar to the hypothetical scenario detailed in this article’s intro – it would give consumers an opportunity to buy a home who would be otherwise qualified if not for a poor FICO score or lack of a credit score altogether.

The bill is still in limbo, but the thought that an alternative credit score could soon be used by GSEs seems to be gaining momentum. According to reports, Freddie Mac representatives have already been considering several alternative credit scoring models.

Improving Your Credit Score

In the meantime, if you’re a consumer in the market for a home or similar large purchase but your credit score isn’t up to snuff, it’s always a good idea to take the initiative to improve it, whether GSEs have yet to use alternative scoring models or not. Here’s a look at some ways to get your FICO score back up to good or excellent status:

  • Pay bills on time: Set reminders, alerts or automatic payments to make sure that you’re not late on anything. Delinquencies and bills that go to collections can cause your score to take a big hit.
  • Reduce your credit utilization ratio: Say you have $10,000 worth of available credit, but are in debt $7,000 or so. You’re using 70 percent of your credit utilization ratio, which can cause your credit score to dip. For a better score, work to get your utilization ratio at or below 30 percent.
  • Don’t move debt around – pay it off: Focus on paying off high-interest accounts first so that you’ll save more long-term.
  • Check your report: One of every five Americans is estimated to have some sort of error on their credit report. If you don’t check it, you’ll never know if your score is low for the wrong reasons. Hence, it’s important to check your report at least once a year and immediately dispute inaccuracies.

Finally, it’s important to be patient. Credit repair doesn’t happen over night, it takes months of persistence and good consumer behavior. So be patient and stick to the credit repair plan that you’ve decided on.

Buying a Home in 2016 – Trends to Watch

Is 2016 the year you will act on your dreams and buy a home of your own? This year is going to be different than ones in the past, and upcoming trends can affect prospective homeowners in some dramatic ways. A few things to look out for:

1. Interest rates are going up.

Interest rates held steady at record lows for a decade. But, the Fed raised a key interest rate in mid-December and they expect to make four more increases this year. This is going to mean higher interest rates for borrowers, as well.

To insure the very best interest rate possible, make sure you improve your credit before applying for a loan. Make sure that any entries on your credit report that could drag down your score are dealt with. A difference of even 1% can add up to tens of thousands extra over the life of your loan.

2. More renters looking to buy.

Rental prices are expected to increase by eight percent on average in 2016. Since buying a home is already cheaper in most markets, increases could be enough to encourage some renters to make the jump and buy a home instead. If enough people make the switch, it can increase competition significantly.

3. Millennials (maybe) entering the market.

Consumers between 18 and 34 continue to confound industry experts. On average, they are less likely to want to buy homes than previous generations were at the same age. However, a recent survey shows that 13% of Millennials plan to buy a home within the next year and 35% say they’d like to buy by 2018. Since Millennials are the largest consumer cohort in the country, increased competition from this group can mean that it’s harder to find a home to buy.

4. Better prices.

Despite the pressures listed above, home prices are expected to go up more slowly than they did last year. In 2015, housing prices went up over 6%, but are expected to go up just 3 to 5% this year.

This smaller increase can help balance some of the pain of higher interest rates on mortgages. But, some industry experts think that the lower prices may make some people who may have decided to sell to stay where they are and invest in their current homes instead.

Each year brings a different set of challenges to prospective home buyers. But, by keeping up on the trends and building the strong foundation you need to qualify for a great deal on a mortgage, you can be ahead of the game. Talk to us now about how we can help you get ready for home ownership in 2016.

Inquiries – When Do They Hurt Your Score?

Many people are in a position to buy a home at some point in their lifetimes. However, unlike the select few that can pay cash straight up for a new home, the majority have to apply – and be approved – for a mortgage by a lender. With that being said, most people like to rate shop, or see what type of an interest rate they can get and what type of loan amount they’re eligible for from several different lenders before opting to go with one.

But in order for a lender to give you accurate information, they have to do a credit check. On that note, many people believe that these credit checks will have a negative impact on their credit score. That’s simply just not true. We examine more below:

Hard vs. Soft Inquiries

Soft credit inquiries are when you or a business is simply checking your credit score, not when your information is being reviewed by a potential lender. Soft checks don’t have any impact on your credit score. Hard checks, however, do. Unlike soft checks, hard checks are when a potential lender is reviewing your credit information because you’ve applied for a loan with them. By definition, a lender reviewing your credit information for the purpose of a home loan is considered a hard check.

So then why doesn’t a mortgage inquiry impact your credit score? Because rate shopping, whether it be for a home loan, auto loan or student loan, is the long exception to the hard credit inquiry rule. Simply put, the FICO score considers any type of mortgage inquiry – not matter how many there are – within a 45-day period as a single entry.

The only real way that individuals can get into trouble credit score-wise when it comes to mortgage inquiries is if they do it on more of a long-term process and not within the 45-day window that FICO usually works off of. They may also run into issues if their inquiries are not similar when it comes to the mortgage.

We get how important a good credit score is in securing a low interest rate, potentially saving you thousands of dollars over a 15-year or 30-year home loan period. And that’s why people are hesitant to rate shop when it comes to a mortgage lender. But you shouldn’t fear an impact to your credit score by rate shopping, simply because there won’t be any impact as long as it’s done within a 45-day time period and the mortgage inquiries are similar. It’s only natural to want to get the best rate on your home loan and the system is fairly designed to permit this.

New Mortgage Rules – What You Need to Know

When you apply for a car loan, new credit card or special financing through some other entity, approval or denial is usually granted in a matter of minutes. Simple enough, right?

But if you’ve ever purchased a home before, you know that this is hardly the case when it comes to a mortgage loan. In fact, “simple” is probably the last term that many people would use to describe the process.

Yes, home loans are the exception to a lot of the credit approval norms. There’s pay stubs, bank statements, credit reports and more involved in the home buying process, so much so that it’s not uncommon for 30-45 days (depending on what type of mortgage you’re applying for) to pass before getting approved or denied for the loan. In large part, you can thank the baby boomers generation for the tedious process that is getting a home loan these days, as the much more relaxed process from year’s past resulted in the housing fallout and economic recession in the mid to late 2000s.

Anyway, there’s now hope for a smoother mortgage process thanks to the Consumer Financial Protection Bureau (CFPB) and some new disclosures that have recently been instituted. Here’s a look at the new rules and how they may offer hope for a better mortgage process moving forward:

New CFPB Disclosure

The new CFPB disclosures took effect on October 3 and aim to smooth the mortgage process in two ways:

  1. It cuts the number of disclosure forms in half: Instead of having to take out four forms, many of which just present the same information over and over again, borrowers will only have to take out two – the Loan Estimate and Closing Disclosure. This is intended to present information to borrowers in a more simple, easy-to-understand manner than before.
  2. Extended review time: Previously, borrowers only had 24 hours to review mortgage documents. This timeline now increases to three days. This enables borrowers to get more thorough answers to any questions they may have about the mortgage process and make changes if necessary. The only disadvantage to this new part of the disclosure is that any last-minute changes will slow down the process. For instance, if there’s a change in any of the documents on the day of closing, the clock will reset and the home won’t be able to close for another 72 hours, not only delaying the sale of the home, but potentially jeopardizing any interest rate locks.

While the new disclosures are intended to make the mortgage process smoother and easier to understand, experts warn that it may take time for real estate professionals to get up to speed on these new rules and regulations, so be patient at first. But in the long run, it’s likely to make the process a lot more transparent and streamlined for borrowers.

CAIVRS – Will This Report Stand Between You and Your Dream Home?

Can a CAIVRS Report Stand Between You and Your Dream Home?Sudden roadblocks when you are trying to get all your ducks in a row to buy a home can be frightening and disheartening. And, some barriers can be bigger than others and can make it nearly impossible to fulfill your dream of home ownership. The best thing you can do is learn about your personal credit situation and what lenders are looking for. This way, you are prepared before you lose money on mortgage seeking costs and have a better chance of getting approved.

What is CAIVRS and Why Does It Matter?

CAIVRS stands for “Credit Alert Verification Reporting System.” It’s a federal database that keeps track of everyone who has defaulted on a a loan, had a loan foreclosed or is currently delinquent on a debt that is owed to the federal government. Debts that can get you on the list include Small Business Administration loans, Federal student loans, Veterans Administration home loans and FHA loans. If you are currently on the list for bad debt, you are not eligible for FHA mortgages. And, other lenders have also begun using the system and will deny a loan to someone who is on the list.

How Can I Find Out if I Am On the List?

Entries on the CAIVRS database are one of the very first things that a potential lender will look for. So, if you are listed, you will find out right away when you start your search for a mortgage and can avoid paying fees for a loan that you will not qualify for. You can also call HUD directly to find out if you have a loan that is listed. If you have a foreclosure under an FHA mortgage, you will appear on the CAIVRS list for three years after HUD pays the insurance claim to your lender. Because of this, it may be more than three years before the entry disappears; if HUD takes five months to pay, the clock will start counting down then. Also, if you declare bankruptcy and include your home, the bank may sit on the claim before filing.

What If I’m on the List and I Shouldn’t Be?

As with any database, there is the potential for errors. If you had a bad debt that landed you on the list, it’s possible that your entry may not be removed when it is supposed to be. If you find out that you are listed erroneously, you can get off the list by contacting the FHA. The FHA will request documentation showing that your debt is paid or that it is far enough in the past that it should not disqualify you from a loan.

An entry in the CAIVRS database may slow down your progress to owning a home, but, it doesn’t have to be the end of it. Find out when your entry is due for removal. Circle that date on the calendar and start thinking of what can make you an even more appealing borrower in the meantime. Can you save more toward a down payment? Pay down other debts? By looking at your borrowing history as a whole, you can make yourself stronger and increase your chances of getting the loan you want.

Bad Credit Home Loan

Fix your credit – Get approved for a loan!

In today’s world, credit scores are more important than ever. Without a good credit score, it’s virtually impossible to attain a house, car or anything that requires long-term repayment. The good news is, while a good credit score is crucial, a bad score can get fixed more quickly than you might think. Here are some good credit tips for shaping up your credit score as you prepare to purchase a house. Improve and Get Approved

The Big Picture

Before you can repair credit, you have to understand exactly what you’re repairing. For most people, this means fixing a spotty payment history and a high debt-to-credit-limit ratio. These two factors comprise 65 percent of your FICO score, with payment history being a slightly more important factor.

Credit Report Review

Your first step in the credit repair process is pulling your credit report and looking for errors. An estimated 80 percent of credit reports have errors, and a quarter of these errors can impact your ability to get a loan. It’s important to take note of any inaccurate information, particularly late payments that weren’t truly late. Disputing these errors and getting them removed will improve your credit score significantly.

Reducing Debt

When applying for a mortgage, the bank wants to assess your debt management skills. Carrying large credit card balances isn’t the way to show that you’re a responsible money manager. Get your balances as low as possible before beginning the mortgage application process. You’ll want to have card balances no higher than 30 percent of your credit limits.

Managing Inquiries

Every time you apply for credit, an inquiry is noted on your credit report. This normally isn’t a big deal, and counts for just 10 percent of your FICO score. That said, too many inquiries in a short period of time makes you look like you’re desperate for cash, and it might turn a bank off from lending to you. Make sure you have as few inquiries as possible as you prepare to buy a home.

Why Credit Scores Matter

You might be able to get a mortgage with a credit score of 660, but you won’t get as good a rate as someone with a score of 740. That difference could add up to thousands of dollars in finance charges over the life of the mortgage. It’s in your best interest to get your credit score in the best shape possible before you apply for a mortgage. The higher the score, the less you’ll end up paying for the house of your dreams. For additional information on how to repair your credit, please contact our office at 617-265-7900 or request a free consultation below.

marital issues because of debt

Bad Credit Aftermath – How Much it Can Cost You?

How Much Does A Bad Score Really Cost You?

Common sense will tell you that having a good credit score is much better than having a poor credit score, as far as loan approval and interest rates go. But do you really know how much a bad score can really cost you? You might be surprised.

Take a 30-year mortgage for example. Now take a good credit score (680-699), an excellent credit score (740+) and a poor credit score (620-639). Here’s a look at the breakdown of possible costs over the course of a hypothetical $200,000 home loan:

  • Excellent credit (4.025 percent): A likely monthly payment of $958, which equates to an $11,493 annual cost and a $344,798 lifetime cost.
  • Good credit (4.974 percent): A monthly cost of $1,070, annual cost of $12,846 and lifetime cost of $385,368.
  • Poor credit (5.418 percent): A monthly cost of $1,133, annual cost of $13,598 and lifetime cost of $407,950.

As you can see, having an excellent credit score can save you up to $113 per month and $40,591 over just having a “good” credit score over the course of a 30-year mortgage. And an excellent score can save you $175 per month and $63,173 over a “poor” credit score. Hence, taking measures to repair credit before financing such a significant purchase is crucial to your short- and long-term finances.

So just what are some credit tips to repair a poor score?

  • On-time payments
  • Keeping debt within 30 percent of your total credit allotment
  • Having a diversity of different credit
  • Having a lengthy credit history

As if having a favorable credit score wasn’t important enough, the above examples certainly place even more significance on the importance of credit repair and debt management if you’re in a financial bind. As the above examples show, a good credit score could mean the difference of tens of thousands of dollars over the course of a long-term loan. That’s a lot of money that you surely could put toward other purchases and a big incentive to take measures to improve your credit score today.

For more information on how to repair your credit, please contact our office at 617-265-7900 or request a free consultation below.