The temperatures may be low in the Gopher state, but the credit scores are high, according to Experian's latest annual State of Credit study.
The Minneapolis-St. Paul area boasts the highest credit scores average in the country, coming in at 709 out of 850, 34 points above the national average of 675. It's no wonder the entire state of Minnesota ranks number one overall for the highest credit scores in the nation.
The top scores can be attributed to a robust Twin Cities economy, low unemployment and a relatively low cost of living, including stable housing prices—and a relatively conservative attitude toward managing debt.
"A strong economy, an emphasis on education and a Midwestern mentality when it comes to money mean you end up with higher credit scores," says Grant Meyer, a certified financial planner in Bloomington, a Twin Cities suburb. "Part of your credit score is making on-time payments and adequately dealing with debt. You have to have the income to do that."
Business is Booming in the Twin Cities
Minnesota's overall unemployment rate was just 3.1% in November, a full percentage point lower than the national average of 4.1%. The Minneapolis-St. Paul area unemployment rate in November (the most recent figures available) was 2.4%, even lower than the state average.
"We have a lot of great businesses that offer strong wages relative to the cost of living," says Jason Kley, a certified financial planner and the president of the Financial Planning Association of Minnesota.
Indeed, the Twin Cities is home to 17 of the Fortune 500's largest corporations, in addition to a number of smaller firms and private companies. The area is a leader in biotechnology and biomedical research, two growing fields.
The greater Twin Cities region's economy is expanding: Its labor force has grown by 4.6% over the last five years, compared with 4.1% nationwide. And it's expected to keep increasing by 5.2% over the next five years. Meanwhile, housing prices remain relatively affordable: The median home value in Minneapolis-St. Paul is $240,500—a 5.3% increase over the past year, according to Zillow.
Minneapolis Residents Pay Their Bills on Time
The high credit scores in the region don't mean that residents of Minneapolis-St. Paul don't take on any debt—they're just better at managing it.
The average credit card balance for Twin Cities residents was $6,036, $318 below the national average, while they carry about three credit cards per person. They do, however, keep their credit card utilization ratio—that is, the amount of credit they're using relative to the amount of credit available to them—at 26%, on average. Utilization ratios under 30% are usually required for high credit scores.
They make payments on time, too. Consumers in the area averaged 0.2 late payments per billing cycle, which is next to nothing. And only 20% of residents have one or more accounts that are 90 days overdue. That figure is among the lowest in the country, and well below the national average of 36%.
Editor's note: Credit scores mentioned in this piece are VantageScore.