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Why You May Not Be Able to Get a Personal Loan Where You Live

Where you live can have a major impact on your ability to take out a loan, however it comes down to a lot more than just your address. One significant indication that where you live does have an impact on your loan worthiness is a report done by Experian in which they listed the cities with the 10 highest credit scores and 10 lowest credit scores. Surprisingly, 8 out of 10 cities with the highest average credit scores lived in the Midwest and all 10 cities with the lowest credit scores lived in the South. As you likely know, credit scores are the number one indicator of loan worthiness. Let’s take a look at the reasons behind why where someone lives can have an impact on their ability to get a loan.

Local Economic Conditions Play a Major Role

The top 10 cities with the highest credit scores all have some of the lowest unemployment rates in the nation. On the other hand, the bottom 10 have some of the highest. It’s quite self-explanatory– when people are unable to find employment, they have a hard time affording their bills and thus banks are much less likely to give them a loan. However, local economic conditions aren’t a complete tell-all as there are some cities such as Jacksonville, Florida that has an 8.5 percent unemployment rate and a credit score average of 729 (21 below the national average) and Hartford Connecticut has the same level of unemployment, but an average credit score of 771 (which is 21 above the national average).

There’s a Credit Score Penalty for ‘Flashiness’

Although this may seem a bit far-fetched, it is entirely true. If you live in a city in which your image counts for a lot, then lenders assume that your spending will outpace your bill management ability. For instance, Los Angeles has an average credit score of 729. The feeling of needing to live up to a standard of living that is above your paygrade can lead people to spend too much and get into trouble with debt and so lenders are wary of that.

People in the Midwest Tend Not to Carry Debt

An easy explanation for why people in the Midwest are much more likely to be given a loan than in the South is simply that many Midwesterners don’t believe in carrying debt and so there are much less people attempting to take out a loan and so lenders are simply more willing to give out money. In the Midwest it is looked much more down upon to have debt collectors after you or to be drowning in uncontrollable debt and so people from there ensure that this won’t happen. When it comes down to it on average people in the Midwest handle their money much better than the rest of the US and thus are looked upon much friendlier by lenders.

Smart Cities Are Looked Upon Better by Lenders

It’s a well-known fact that the more education you’ve received, the better you’re able to manage your debt and credit and thus avoid financial missteps. In regions where people have lower incomes and education levels, lenders are less likely to hand out loans. Lower education levels are associated with higher unemployment, which is one of the top reasons for debt accumulations and missed payments. On the other hand, there are studies that show that financial competence correlates highly with education levels, as those with more financial knowledge are less likely to accumulate debt. In regions that are known as “smart” such as San Francisco, people have better chances of receiving a loan.

Depressed Real Estate Is Bad for Borrowing

If you reside in an area such as Southern California that is considered to be in a depressed real estate market where many defaults and foreclosures are occurring, then there are many people who are not ashamed to have done it as it has become somewhat normalized. Lenders take this normalization into consideration when considering whether or not to lend and may sway more on the negative side because of it.

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