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Americans’ Credit Conditions, By State

When it comes to credit, the reverberations of COVID-19 are shaking some states more vigorously than others, according to an Annual CardRatings state-by-state study.

States in the best position to bear the brunt of this year’s economic uncertainty are reflected in the study. The possible upshot: households that began the year with the w3eeakest credit might be most susceptible to economic hardship.

For the fourth year in a row for the study, North Dakota paced the list, raking in the top 10 in four out of five categories, with Vermont against finishing second in light of its second lowest bankruptcy rate and second highest average credit score.

The most significant drop off in ranking occurred in Delaware, where unemployment spiked higher than in any state. The toll on economic conditions was relatively withering, plummeting from 16th to 42nd. Conversely, while Kentucky bounced back the most vigorously since last year’s analysis, it only wound up in the middle of the pack at 25th overall despite its escalation by 15 places. Fueled by an atypically steep drop in Labor Force participation and a decisive boost in June employment, it parachuted from 42nd to 1st for low unemployment.

Meantime, in terms of population, Alabama experienced almost 10 times the bankruptcies as Alaska, while in Minnesota, the average credit score’s more than 60 points higher than Mississippi. The credit card debt of Alaska residents approaches 15% of their annual income. In the District of Columbia, it comes it at less than 9%.

Then there’s New Jersey, where a home’s 17 times as likely to enter foreclosure as one in South Dakota, while the unemployment rate in Massachusetts is four times Kentucky’s jobless rate.

Mortgage credit availability is on the rise while more residential properties moved into a state of equity richness according to a pair of data reports issued recently,

The Mortgage Bankers Association (MBA) reported that its Mortgage Credit Availability Index (MCAI) increased by 1.5% in July to a reading of 126.9. The index was benchmarked at 100 in March 2012, and a decline indicates tightening lending standards while index increases support loosening credit.

The Conventional MCAI, which covers non-government loan programs, increased 2.9% last month while the Government MCAI, which examines the FHA, VA, and USDA loan programs, saw a 0.4% uptick. Two component indices of Conventional MCAI also recorded increases: The Jumbo MCAI was up by 5% and the Conforming MCAI took a 1.2% rise.

"Credit availability rose slightly in July–the first increase in eight months–as the supply of certain types of adjustable-rate mortgages and jumbo loans increased," observed Joel Kan, MBA’s AVP of Economic and Industry Forecasting. "The improvement was more of a leveling off from the precipitous drop earlier this spring.

About Author: Chuck Green

Chuck Green has contributed to the Wall Street Journal, Washington Post, Los Angeles Times, San Francisco Chronicle, Chicago Tribune and others covering various industries, including real estate, business and banking, technology, and sports.

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