South Has Low Credit Scores, Economists Blame Medical Debt

iluvatar5150 · Feb 19, 2023

https://www.washingtonpost.com/business/2023/02/17/bad-southern-credit-scores/

Almost every corner of America’s most populous region — every race, every income bracket — appears to have low credit scores. But why?

The region’s poor credit means Southerners are paying more to borrow money, assuming they can qualify for loans at all. That sets them back in everything from car and home purchases to credit card rewards. Yes, even credit card rewards.

…demography is no match for geography. Even some of the South’s biggest, most dynamic cities — think Atlanta or Dallas — have the same below-average credit scores as their more rural Southern neighbors. Within every income bracket, the typical Southerner has a lower credit score than someone who lives in the Northeast, Midwest or West.

The reason why credit scores are so low in the South has gotta be connected to medical debt, because that’s the most common type of unpaid bill that people have,” Braga said. And the South, he said, easily has the highest levels of medical debt in the country.

Maria Billingsley · Feb 19, 2023

iluvatar5150 said:
https://www.washingtonpost.com/business/2023/02/17/bad-southern-credit-scores/

Almost every corner of America’s most populous region — every race, every income bracket — appears to have low credit scores. But why?

The region’s poor credit means Southerners are paying more to borrow money, assuming they can qualify for loans at all. That sets them back in everything from car and home purchases to credit card rewards. Yes, even credit card rewards.

…demography is no match for geography. Even some of the South’s biggest, most dynamic cities — think Atlanta or Dallas — have the same below-average credit scores as their more rural Southern neighbors. Within every income bracket, the typical Southerner has a lower credit score than someone who lives in the Northeast, Midwest or West.

The reason why credit scores are so low in the South has gotta be connected to medical debt, because that’s the most common type of unpaid bill that people have,” Braga said. And the South, he said, easily has the highest levels of medical debt in the country.

It is high debt to income ratio. Here in California, there is a lot of incurred debt, points are dedected for maximization of credit. If you only service your debt and not pay if off you will have a low score. Medical bills are a thing of the past since Obsma care came into fruition, unless you're in a state that rejected this helping hand you will most certainly be straddled with this kind of debt.
According to wiki these are the states that refuse to help the poor:

As of the time of writing, only 12 states have not done so: Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming.

Blessings.

SavedByGrace3 · Feb 19, 2023

We must be the exception that breaks the rule. I live in the Carolinas and have had a credit rating over 840 for years. I am completely out of debt, and my credit rating actually dropped 10 points from 850 the month after I paid off my home 6 years early.
I don't understand credit ratings... but I am suspicious.

Pommer · Feb 19, 2023

SavedByGrace3 said:
We must be the exception that breaks the rule. I live in the Carolinas and have had a credit rating over 840 for years. I am completely out of debt, and my credit rating actually dropped 10 points from 850 the month after I paid off my home 6 years early.
I don't understand credit ratings... but I am suspicious.

Yes, when you discharge a loan your credit rating goes down.
(When you don’t owe anyone, you become harder to “track”; uncertainty breeds doubt and your score plummets.)

SavedByGrace3 · Feb 19, 2023

Pommer said:
Yes, when you discharge a loan your credit rating goes down.
(When you don’t owe anyone, you become harder to “track”; uncertainty breeds doubt and your score plummets.)

Thanks for the explanation. I figured it was something like that.

Fantine · Feb 19, 2023

I know in my state if a person has not paid a medical debt for two years it is written off as a bad debt. I am sure it appears on the patient's credit rating, but it's off the books legally. Fortunately I've never been in that situation. I think if you tell them you can only pay $20 a week--but pay the $20--the two year period doesn't start until you stop paying the $20.

And of course we have a new governor. Our former governor was also a Republican, but he kept the legislators (who are pretty much off the rails most of the time) in line. He vetoed bills he believed were unconstitutional and told them to shape up. During COVID, he had daily conferences with medical experts in attendance. He wasn't an election denier or a Trump supporter. He was about as decent a Republican as we all could have hoped for.

His successor's proposals are the stuff nightmares are made of. There will no longer be a gatekeeper saving us from the legislature's craziest actions (and believe me, they are crazy.) She will even propose a bunch of her own probably unconstitutonal crazy ideas as well.

God help the medically indigent. God help the rural people. God help children in our schools. God help teachers. God help us all.

Nithavela · Feb 20, 2023

I think that the credit score rating in the USA encourages frivolous borrowing, keeps people in debt and in general is a tool to create money out of poverty.

Over here in germany, everyone starts with a good credit score and only failing to repay your debt drops your score.

Nithavela · Feb 20, 2023

Fantine said:
I know in my state if a person has not paid a medical debt for two years it is written off as a bad debt. I am sure it appears on the patient's credit rating, but it's off the books legally. Fortunately I've never been in that situation. I think if you tell them you can only pay $20 a week--but pay the $20--the two year period doesn't start until you stop paying the $20.

And of course we have a new governor. Our former governor was also a Republican, but he kept the legislators (who are pretty much off the rails most of the time) in line. He vetoed bills he believed were unconstitutional and told them to shape up. During COVID, he had daily conferences with medical experts in attendance. He wasn't an election denier or a Trump supporter. He was about as decent a Republican as we all could have hoped for.

His successor's proposals are the stuff nightmares are made of. There will no longer be a gatekeeper saving us from the legislature's craziest actions (and believe me, they are crazy.) She will even propose a bunch of her own probably unconstitutonal crazy ideas as well.

God help the medically indigent. God help the rural people. God help children in our schools. God help teachers. God help us all.

I'm happy people in your state got the governor they wanted.

FireDragon76 · Feb 20, 2023

iluvatar5150 said:
https://www.washingtonpost.com/business/2023/02/17/bad-southern-credit-scores/

Almost every corner of America’s most populous region — every race, every income bracket — appears to have low credit scores. But why?

The region’s poor credit means Southerners are paying more to borrow money, assuming they can qualify for loans at all. That sets them back in everything from car and home purchases to credit card rewards. Yes, even credit card rewards.

…demography is no match for geography. Even some of the South’s biggest, most dynamic cities — think Atlanta or Dallas — have the same below-average credit scores as their more rural Southern neighbors. Within every income bracket, the typical Southerner has a lower credit score than someone who lives in the Northeast, Midwest or West.

The reason why credit scores are so low in the South has gotta be connected to medical debt, because that’s the most common type of unpaid bill that people have,” Braga said. And the South, he said, easily has the highest levels of medical debt in the country.

People in the South have more health problems, mostly due to diet and lifestyle factors. There's also alot of poverty and most states have anti-Labor laws.

WolfGate · Feb 20, 2023

Maria Billingsley said:
Medical bills are a thing of the past since Obsma care came into fruition, unless you're in a state that rejected this helping hand you will most certainly be straddled with this kind of debt.

Can you please clarify what you meant here since clearly medical bills do not go away with insurance. There are co-pays, deductibles, maximums and other factors that result in people with insurance still receiving bills. (And of course if people are getting billed, then debt can accumulate)

iluvatar5150 · Feb 20, 2023

WolfGate said:
Can you please clarify what you meant here since clearly medical bills do not go away with insurance. There are co-pays, deductibles, maximums and other factors that result in people with insurance still receiving bills. (And of course if people are getting billed, then debt can accumulate)

From what I understand, the Medicaid expansion did a lot to reduce medical debt. I believe the mechanism was via reducing the amount of debt incurred rather than eliminating existing debt.

Tuur · Feb 20, 2023

Maria Billingsley said:
It is high debt to income ratio. Here in California, there is a lot of incurred debt, points are dedected for maximization of credit. If you only service your debt and not pay if off you will have a low score. Medical bills are a thing of the past since Obsma care came into fruition, unless you're in a state that rejected this helping hand you will most certainly be straddled with this kind of debt.
According to wiki these are the states that refuse to help the poor:

As of the time of writing, only 12 states have not done so: Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming.

Blessings.

The initial premise contains a significant flaw: That the cause of debt is medical bills because a higher percentage of medical bills are unpaid. Uh-uh. People tend to leave unpaid the bills based on personal priority and the ones they think they can skip. As an example, it's not unusual for me to come across a facilities locate request from satellite dish companies where the account is delinquent on their electric bill.

Let that sink in a moment: There are those already over-extended who then invest in a non-essential with another monthly fee.

If you have an answer for that, please let me know. I've seen it and have been baffled by it for most of my life. Just as a common question in large ticket purchases is "How much down and how much a month?" Not "What's the interest and how many months?"

That doesn't answer the question of why there's more debt in some parts of the country than others. One thing that comes to mind is that the cost of living in parts of the Southeast in general tend to be lower than other places, but the cost of large ticket items like new vehicles have skyrocketed. I suspect that while it's possible to live from day to day on less, the cost of large ticket items strains that. But it's just an assumption.

That doesn't agree with the initial premise in the Washington Post article, but unlike the Post, I see it firsthand.

Tuur · Feb 20, 2023

FireDragon76 said:
People in the South have more health problems, mostly due to diet and lifestyle factors. There's also alot of poverty and most states have anti-Labor laws.

Who was I going to unionize on the family farm? Me and my kinfolks?

A note on poverty: keep in mind that it depends on what metric you use. By national average, sure. But by local cost of living, not much so. When I was a child, I saw literal tar paper shacks, the tar paper held on by nails driven through bottle caps. Today they're gone, replaced in some places by single and double-wide trailers, and in others by more traditional homes. Now, I don't know how their income of the residents stacks up nationally, if they would be considered as living in poverty, but it wouldn't surprise me. It's still better off than what I saw growing up.

SavedByGrace3 · Feb 20, 2023

FireDragon76 said:
People in the South have more health problems, mostly due to diet and lifestyle factors. There's also alot of poverty and most states have anti-Labor laws.

People in the south, and other places, do see it as "anti-labor laws." They see these laws as "right to work" laws. Meaning people do not want to be forced to pay union dues and be subject to union rules and union reps. Hence they have the "right to work" without being forced to join a union.
My wife's mother recalls the attempt to unionize the local mills back in the early part of the last century. The union organizer allegedly took the money of the members and left town. Since that occurred you could not unionize those people at gun point. And these were "yellow dog democrats." There was another effort to unionize the three mills back in the 70s. Failed. Within a few years all three local mills shut down.

Pommer · Feb 20, 2023

SavedByGrace3 said:
People in the south, and other places, do see it as "anti-labor laws." They see these laws as "right to work" laws. Meaning people do not want to be forced to pay union dues and be subject to union rules and union reps. Hence they have the "right to work" without being forced to join a union.
My wife's mother recalls the attempt to unionize the local mills back in the early part of the last century. The union organizer allegedly took the money of the members and left town. Since that occurred you could not unionize those people at gun point. And these were "yellow dog democrats." There was another effort to unionize the three mills back in the 70s. Failed. Within a few years all three local mills shut down.

“Right to work” deserves the inverted commas, (quotation marks); the other end of that is the “right-to-be-fired” for any reason, or no reason. The free-market brought all the way down to a worker selling their own labor to the highest bidder.

FireDragon76 · Feb 20, 2023

SavedByGrace3 said:
People in the south, and other places, do see it as "anti-labor laws." They see these laws as "right to work" laws. Meaning people do not want to be forced to pay union dues and be subject to union rules and union reps. Hence they have the "right to work" without being forced to join a union.

A dubious freedom. Labor unions should have the right to negotiate a closed shop. Businesses exert influence all the time, it's only right and fair that labor has the same privileges

WolfGate · Feb 20, 2023

iluvatar5150 said:
From what I understand, the Medicaid expansion did a lot to reduce medical debt. I believe the mechanism was via reducing the amount of debt incurred rather than eliminating existing debt.

If that is what Maria meant by her post, it's still a far cry from "medical bills are a thing of the past". I'll grant the program helped reduce debt, but it's still odd to me that we in the USA are willing to accept both having one of the least cost effective medical systems in the developed world and also having people who go bankrupt solely through medical debt that was no fault of their own. It's almost like an involuntary reverse lottery where you find out eventually if you one of the unfortunate ones who will go to bankruptcy because you got sick.

FireDragon76 · Feb 21, 2023

Pommer said:
“Right to work” deserves the inverted commas, (quotation marks); the other end of that is the “right-to-be-fired” for any reason, or no reason. The free-market brought all the way down to a worker selling their own labor to the highest bidder.

"right to work" is the exact sort of doublespeak one would find in an Orwellian dystopia.

essentialsaltes · Feb 21, 2023

The article's very interesting for showing several different maps of the US with different data laid onto them... and they all look similar, at least as far as the South being an outlier. In addition to credit score:

Share with medical debt in collections, February 2022
Share of the Medicare-using population with four-plus chronic conditions, 2018
Medicaid expansion relative to the 2014 rollout [many southern states have chosen not to expand Medicaid]
Share of the population with health insurance, ages 19 to 64, 2017-2021

Of course, you have to be wary. I heard recently that everyone who confuses correlation with causation eventually dies. But it does seem to show the South has some problems (not a huge surprise, I know).

rambot · Feb 21, 2023

There are very few positive metrics that the South beats the North at. They have governments who keep saying they'll solve the problems they created and the people keep voting for them as they don't really change a thing.

It's interesting how many statistics maps show the area around the south performing differently than the rest of the country in whatever metric is being show.

South Has Low Credit Scores, Economists Blame Medical Debt

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