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10 U.S. Metro Areas That Are Borrowing Smart — and 10 That Aren’t

Aug. 11, 2014
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Consumer debt has become synonymous with the American way of life. From New York to Los Angeles and every city in between, we’ve become accustomed to living in the red. In fact, according to a NerdWallet analysis, the average indebted U.S. household was carrying $15,191 in credit card debt as of April 2014. That’s a significant, and expensive, balance to roll over every month.

But it’s important to remember that debt isn’t bad. We use credit to finance important purchases like cars, homes and college educations. So how do you know how much is too much when it comes to debt? Two important indicators are debt levels and credit scores, so NerdWallet considered those factors and created the Smart Borrowing Score. The study looks at 136 metropolitan areas in the U.S., and by comparing VantageScores to levels of debt as a percentage of household income, we get a sense of how residents are handling debt.

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About this study

To create each metro area’s Smart Borrowing Score, NerdWallet answered the following questions:

1. How much are residents borrowing relative to their incomes? One way to figure out if residents are borrowing smart is to put average debt levels into context. We divided each metro area’s average amount of consumer debt into its median household income to get a better sense of the places that are carrying truly heavy loads. A high ratio of average debt to median household income indicates danger on the horizon. Nerd note: These percentages should not be interpreted as the metro area’s debt-to-income ratio. Also, remember that the average debt levels analyzed by NerdWallet do not include mortgage debt, but do include debt on credit cards, auto loans and personal loans.

2. How are residents managing their debt payments? Credit scores are an indicator about how well people are managing their debt. We used VantageScore, the major competitor to the FICO credit score. As with the FICO model, VantageScores fall between 300-850, with the higher number, the better the score.

Key findings

        • Smart borrowing is not simply about the amount borrowed. The average consumer debt of the 10 metros borrowing the smartest is $25,480, while the average for the 10 areas not borrowing smart is $26,520 — a difference of only $1,040.
        • But smart borrowing is also not exclusively driven by income. For example, Washington, D.C., the metro area with the highest median household income in 2012 had the seventh-highest Smart Borrowing Score. In sixth place was Iowa’s Cedar Rapids metro area, which ranked 24th in median household income, but had an average VantageScore 23 points higher than that of the nation’s capital. This drives home the point that people at all income levels can borrow smart if they manage their payments effectively.
        • The national average VantageScore in 2013 was 681, according to Experian. Nine out of the 10 metro areas that are borrowing the smartest exceeded this benchmark, but none of the metro areas that are borrowing the least smart received that average score. 
        • Metros that are borrowing the smartest are spread out throughout the country. Four of the 10 metros with the highest Smart Borrowing Scores are located in the Midwest.
        • All 10 of the metro areas that are borrowing the least smart are in the South. Metro areas in Georgia and Louisiana dominated the list.

The 10 U.S. metro areas that are borrowing the smartest

Metro area State Average VantageScore Average consumer debt (excluding mortgages) Median household income Average debt as % of median income Smart Borrowing Score
1 Minneapolis-St. Paul-Bloomington MN-WI 702 $25,626 $66,282 38.7% 91.3
2 Boston-Cambridge-Quincy MA-NH 694 $25,413 $71,738 35.4% 89.7
3 San Francisco-Oakland-Fremont CA 689 $25,828 $74,922 34.5% 87.5
4 Honolulu HI 687 $25,812 $71,404 36.1% 84.2
5 Madison WI 694 $24,610 $58,894 41.8% 82.2
6 Cedar Rapids IA 697 $25,317 $57,222 44.2% 81.3
7 Washington, D.C.,-Arlington-Alexandria VA-MD-WV 674 $27,668 $88,233 31.4% 81.1
8 Burlington-South Burlington VT 691 $25,688 $60,889 42.2% 79.7
9 Hartford-West Hartford-East Hartford CT 683 $25,218 $66,732 37.8% 79.5
10 Green Bay WI 697 $23,621 $50,777 46.5% 78.5

The 10 U.S. metro areas that are borrowing the least smart

Metro area State Average VantageScore Average consumer debt (excluding mortgages) Median household income Average debt as % of median income Smart Borrowing Score
1 Monroe LA 639 $25,509 $34,809 73.3% 7.4
2 Jackson MS 629 $27,795 $42,604 65.2% 10.3
3 Columbus GA-LA 639 $28,890 $42,972 67.2% 14.7
4 Waco TX 645 $28,219 $40,658 69.4% 16.1
5 Florence SC 633 $23,744 $38,163 62.2% 16.6
6 Macon GA 640 $25,815 $39,525 65.3% 17.6
7 Fort Smith AR-OK 654 $26,296 $36,061 72.9% 18.0
8 Greenville NC 654 $26,578 $27,759 70.4% 21.0
9 Augusta-Richmond County GA-SC 635 $26,403 $44,761 59.0% 21.8
10 Shreveport-Bossier City LA 635 $25,947 $44,118 58.8% 22.0

How to manage your debt

No matter where you live, struggling with consumer debt doesn’t have to be your reality. Use the tips below as your first steps toward a better financial future. Be sure to take a look at the links for resources and tools to get you started.

              • Borrowing too much relative to household income can put a big strain on family finances. Paying down credit card balances will go a long way toward lifting the burden.
              • If your credit is good, consider transferring your high-interest balance to a 0% card. This could save you big bucks in interest as long as you pay off the charges before the 0% promotion ends. 
              • Consolidating high-interest debt with a personal loan is another way to save money on interest and simplify the debt repayment process.
              • If your financial situation feels overwhelming, talking with a reputable credit counselor can help. Visit the National Foundation for Credit Counseling to find a credit counselor in your area.
              • Improving your credit score is a good step toward getting the most favorable rates on loans. Paying bills on time and reducing credit card debt are the two most important actions consumers can take to raise their scores


To create our Smart Borrowing Score, we began by dividing each metro area’s average consumer debt into its median household income. This created a percentage that shows how much each city is borrowing (on average) in consumer debt relative to median household income and accounted for 50% of the Smart Borrowing Score.

The other 50% was based on VantageScores, which were included in the Smart Borrowing Score because the key behaviors that influence these scores are consumers’ histories with making on-time bill payments and keeping low credit card balances. A high VantageScore indicates that consumers in that area are borrowing and managing debt judiciously.

Average consumer debt numbers and VantageScores are from Experian (current as of February 2014), while median household incomes are from the U.S. Census 2012 American Community Survey 1-Year Estimates, report S1901.In some cases, Experian and the census listed metro areas’ names differently. For consistency, NerdWallet used the names of metro areas as they appear in the census.

The original data set included 143 metro areas, but seven were excluded because of incomplete data for all variables.

 Minneapolis, Minnesota, skyline via Shutterstock