Despite the "Texas Miracle" and incomes that are above the national median, Texans are doing a crappy job of maintaining their financial health. At least, that's what a new report from creditcards.com says. Those aforementioned incomes are about 2 percent higher than the national median. Because incomes and credit scores are generally thought to be correlated, Matt Schulz, creditcards.com’s senior analyst, says Texans' incomes would lead one to believe that their credit cards would be right in the same range.
They aren't. Texans have the sixth-worst credit scores in the country. The average score in the state, Schulz says, is about 20 points lower than one would expect. Schulz blames the disparity on a couple of things. First, he says, Texas' population skews younger that the rest of the country.
"Texas, according to the data that we saw, had the fourth youngest average age of its population. When it comes to credit scores, that makes an impact because one of the five chief criteria in a credit score is length of credit history. So, just by definition almost, it's easier for somebody who's 55 to have a higher credit score than somebody who is 25."
People in Texas are also carrying high balances on their credit cards, according to Schulz.
"The average credit card balance in Texas is in the top 10 nationally. It's about $4,700 per card. When you compare those balance to the state income, you can see where Texans might struggle a little bit to be able to pay off that credit card balance," he says.
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Beyond length of credit history, the percentage of one's available credit being used also highly affects one's credit score — higher balances equal higher rates of utilization.
As oil prices continue to dip and Texas' unemployment rate creeps up in areas dependent on the oil industry, more people may lean on their credit cards, according to Schulz, creating a cycle of declining credit scores.
"Unemployment and job struggles can really have a big impact on your credit score because, if you're worried about losing your job or if you've already lost your job, you may not be able to pay off your credit card balance as fast or you might just not be able to make a payment for a month or two while you're looking for a job," Schulz says.
The most important thing to remember, according to Schulz, is that credit scores aren't complicated. As long as balances are kept low, payments are made on time and credit is applied for judiciously, scores will remain steady or improve, he says.