In a recent look at Southern Nevadans’ finances, Las Vegas Valley residents have some of the worst credit scores, debt ratios and money management habits in the United States.
Personal finance website WalletHub said in early March that Las Vegas residents’ median credit score of 646, combined with higher-than-average debt-to-income ratio for credit cards, mortgages, car loans and student loans, put it in the 30th percentile, or 1,792th of 2,572 cities analyzed in the annual report. North Las Vegas fared even worse, ranking in the 10th percentile with a median credit score of 632.
“These low ratings are highly influenced by each city’s debt levels, which are higher than average,” WalletHub analyst Jill Gonzalez said. “The mortgage debt-to-income ratio in both cities is especially high in both North Las Vegas and Las Vegas.”
The third-annual release of the report mirrors previous trends in the valley. Both Las Vegas and North Las Vegas ranked in the bottom 30th percentile for credit scores and money management in the 2016 and 2017 editions.
Henderson, which finished above Las Vegas and North Las Vegas each of the past two years, did so again this year with a slightly higher median credit score of 684.
The top-ranked city — retirement community the Villages, Florida — had a median credit score of 807. The lowest-ranked city — Camden, New Jersey — had a median score of 541.
Gonzalez said carryover from the housing bubble is a driving factor in the valley’s massive mortgage debt-to-income ratio. At 448 percent and 437 percent, North Las Vegas and Las Vegas are over 100 percentage points higher in their mortgage debt-to-income ratios than the average U.S. city.
UNLV finance professor Dr. Daniel Chi added that while the bubble still affects many Las Vegans’ debt and resulting credit scores, the city’s poor education rankings and generally youthful population also play significant roles in the city’s rankings on financial responsibility.
“Everyone knows our education level is fairly low, and by extension our financial literacy level is also lower than the average.” Chi said. “Also, young people tend to have more debt. As we get older, we pay off our house and student loans, and our ratio gets lower.”
Chi, who has taught at UNLV’s Lee Business School for the past seven years after working for five years at Arizona State University, said Las Vegas is more financially cyclical than other U.S. cities because of its reliance on the tourism industry. When the national economy is up, Las Vegas does better than average, as more people travel here, Chi said. But when times are tough, the valley is among U.S. areas hit the hardest.
He cited national versus local unemployment figures as an example. When the U.S. reached peak unemployment of about 10 percent in 2010 and 2011, Las Vegas’ unemployment was 13.7 percent.
Both Chi and WalletHub’s Gonzalez said there’s no magic fix for valley residents’ money management woes. They encouraged locals looking to improve their credit scores to eliminate debt by first focusing on payments with the highest interest rates, not necessarily the highest outstanding amounts.
“Improving credit is a step-by-step process, and usually with age, experience and more income, gets better,” Chi said.