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Report: Credit Scores Are Lower in the South, and Medical Debt Could Be to Blame

A new analysis finds a link between areas with low average credit scores and high amounts of medical debt.

Credit scores are far lower on average in the South than they are in northern parts of the contiguous U.S. — and medical debt and state lawmakers’ refusal to expand Medicaid could be to blame, a new analysis by the Washington Post has revealed.

The analysis found a gap of roughly 100 points between the lowest average credit scores in the North and South, with the lowest seen most commonly in parts of the Deep South, and the highest typically found in northern states like Minnesota, Wisconsin and New Hampshire.

One of the largest factors at play is medical debt, Post researchers found. Medical debt is the most common type of debt reported in credit reports, and the South has the highest amount of medical debt in the country; according to the Urban Institute, 92 of the top 100 counties with the highest share of people struggling with medical debt, with the other eight in the adjacent states of Missouri and Oklahoma.

The decision by most Southern states not to use additional funding from the Affordable Care Act to expand Medicaid is a major contributing factor to the increased amount of medical debt, the report found, as those states have the highest levels of medical debt and lowest credit scores.

11 states — including North Carolina, South Carolina, Mississippi, Tennessee, Georgia, Alabama, Texas and Florida — have chosen not to expand Medicaid through the ACA.

Medicaid expansion had a huge impact on medical debt across the country; between 2013 and 2020, of the states that opted in, medical debt was cut by nearly half. It also buoyed the general financial health of people who had struggled with medical debt, as the Washington Post pointed out, with people enrolled under the Medicaid expansion seeing their overall debt in collections fall after the program was rolled out.

“Expanding Medicaid could help a lot, but these states just don’t do it,” Urban Institute economist and credit score researcher Breno Braga, told The Washington Post. “And they don’t realize how much of an impact that actually has on people’s lives and their financial well-being — even access to employment. If you have a bad credit history, employers might deny you work, you know?”

Indeed, low credit scores can have devastating impact on the working class’s financial and overall wellbeing — and systemic suppression of credit scores, as the government has used against Black communities, can exacerbate these impacts.

A low credit score reduces the chance of receiving loans for purchasing a house or a car, getting low interest rates for any loan, and having benefits associated with certain credit cards, such as cash back rewards.

The systemic lowering of credit scores for Black Americans and low-wage workers have led to calls for the credit score system to be majorly reformed, if not abolished entirely. The modern credit score system has only existed for less than 35 years, and critics say that credit scores are often used simply to further oppress people who are already disadvantaged in the U.S.

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