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Best and Worst Credit Scores: Here's What Boston Has That Miami Doesn't

Experian's latest State of Credit report paints a familiar yet disjointed picture of credit health in the U.S.

Consumers in some regions seem to have come out on the other side of the recession like champs (we’re looking at you, Midwesterners), while pretty much the entire Southern half of the country is following at a limp.

Experian broke down the data* to rank the largest 11 U.S. metros by credit score, and they seem to follow a similar pattern. Boston topped the list with an average score of 705, followed by runner-up San Francisco and fellow Northern metros New York City and Chicago.  Falling farthest behind was Miami, with an average score of 628, followed by Dallas and Houston with averages of 665 and 666, respectively.

Obviously, your credit score is just one indicator of your overall financial health. It doesn’t reflect how much money you have in the bank, but it gives lenders a picture of how creditworthy you are.

Regional impact

What exactly do the folks in Boston have that people in Miami don’t?

Unfortunately, credit reports only tell us how consumers use credit, not why, which is essential if we want to understand why some regions fare better than others. But we can make a few educated guesses.

For starters, the recession didn’t hit every state with equal force, and states like Florida, California, Nevada and Arizona were pummeled by a tidal wave of foreclosures after the housing bubble burst. Location also makes a difference in how families manage their debt when they’re financially squeezed. A household in Miami earning the median income of $43,900 a year might have more trouble dealing with debt than the same family in Boston, where the median household income is more than 18% higher at $52,000. In San Francisco, which has the second-highest credit score among large metros after Boston, the median household income is $72,000.

Miami’s unemployment rate is still relatively high as well, at 7.3% compared to Boston’s 6.2%.

The age factor

The age of the general population in an area can certainly skew credit scores as well. Regions with a greater number of young and new immigrant populations tend to see lower overall credit health, and the South and Southwest boast some of the youngest populations in the country.

Sometimes, age makes all the difference. Although baby boomers carry nearly $30,000 worth of debt and hold an average of three credit cards, they boast a pretty high credit score of 700. Millennials, on the other hand, carry about $23,000 in debt on average across only 1.5 cards and still have the lowest credit score of all age groups at 628.

“Millennials have the lowest scores [because] they have very few credit cards,” says Maxine Sweet, vice president of public education for Experian. “And while they have lower overall credit debt, that’s not really a good indicator [of credit health]. You can have high debt and a good score because you have a lot of credit cards and low utilization rates.”

Credit utilization — how much you’ve charged on your card vs. your actual limit — is one of many factors that go into formulating a credit score. The higher it is, the lower your score will be. When you have only one or two cards to rely on, like millennials, you can wind up with a higher utilization rate per card than someone who carries three or more. At 37%, millennials’ average utilization rate is nearly four times higher than experts recommend and 7% higher than boomers, according to Experian.

Apart from simply having fewer cards to spread their debt around, millennials (who are between ages 21 and 33) don’t get the benefit of having a lengthy credit history on their file either. Ditto for new immigrants, who are just beginning to build their credit file in the U.S.

“For millennials, showing you can use credit cards is one of the most important ways to build credit,” Sweet says. “I worry that millennials are suffering for the sins of their parents. Many of their parents may have messed up at some point in their life so they are warning millennials away from credit. But every adult needs to establish credit.”

*Experian calculated credit scores for this study using the VantageScore 3.0 model, a revamped version of the original VantageScore, which is a generic credit scoring model that has been around since 2006. VantageScore 3.0 was launched as a joint effort by the three major credit reporting agencies (Experian, TransUnion and Equifax). The biggest difference in the new score is that it's the only credit score that doesn't track debt collection accounts after they have been paid in full and it uses the same 300-850 point scale as FICO.

Have a credit story to tell? E-mail Mandi Woodruff at mandiw@yahoo-inc.com.