With approximately one-third of households unbanked and an increasing number of payday loan shops, title loan firms and pawn shops, Memphis was recently named the least credit-worthy city in America by TransUnion.
Memphis has more than 800 title lenders, tax refund shops, pawn shops and payday lenders, many of which profit from almost $500 million in tax refunds provided to 180,000 low-income employees in the Memphis area through the federal earned income tax credit, according to SeattlePI.com.
Experts maintain that even consumers who never miss a loan payment and make payments on time are considered greater credit risks if they are not associated with a traditional banking institution. Thomas Nitzsche, the spokesman for ClearPoint Credit Counseling Solutions, said that unbanked consumers who use higher-risk loan products affect a region’s overall score.
“The South and Mid-South always have been on the low end of consumer credit scores,” Nitzsche said, SeattlePI.com reports. “But it’s not automatically somebody who doesn’t pay their bill that brings the score down. It could be anything from buy-here, pay-here car loans to payday loans that’s bringing it down.”
TransUnion named McAllen, Texas, and Jackson, Mississippi, and the second and third least credit-worthy cities, respectively. The highest scores, however, were given to San Jose, California, followed by San Francisco and Madison, Wisconsin.