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Rockford-area communities rank poorly in money management

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Rockford-area communities rank poorly in money management

Money management is a classic chicken-or-the egg question.

Are people who earn higher salaries inherently better with handling money versus those living in areas where incomes haven’t kept up? Or are families living in low-income areas forced to make tougher decisions because of lack of available resources?

WalletHub.com released its 2017 ranking of Best & Worst Cities at Money Management and Rockford, Illinois, ranked in the bottom 41 percentile out of 2,534. WalletHub.com asked professors from the universities of California-Irvine, Michigan, West Florida, California-Santa Barbara, New York, Illinois and Wisconsin to rank cities on 10 key financial metrics.

The data comes from TransUnion from 2016 and Renwood RealtyTrac and the rankings are based on the following indicators:

  • Credit card debt-to-income ratio
  • Mortgage debt-to-income ratio
  • Car loan debt-to-income ratio
  • Student loan debt-to-income ratio
  • Median credit score
  • Average number of late payments
  • Share of adults who are delinquent on their debts
  • Share of adults with a bankruptcy filing in the past 12 months
  • Foreclosure rate

A closer look at the rankings showed that high-income areas scored well, while low-income areas scored poorly. Of course, high-income areas also tend to have a more highly-educated workforce, so making distinctions based on income and education are difficult. What is clear is that Rockford still has a long way to go in terms of earning power and handling those earnings better.

Here are the various rankings important to the Transform Rockford area.

WalletHub.com best cities at money management

Rank

City

Median
credit score

Credit card
debt-to-income
ratio

Mortgage
debt-to-income
ratio

Student loan
debt-to-income
ratio

Car loan
debt-to-income
ratio

Average
No. of late payments

1.

Cupertino, Calif.

766

2.30%

436.28%

12.52%

17.52%

0.52

2.

Los Altos, Calif.

776

3.94%

566.51%

15.83%

22.04%

0.43

3.

Lexington, Mass.

776

3.99%

449.10%

16.48%

25.14%

0.46

4.

Scarsdale, N.Y.

764

4.68%

394.68%

11.87%

20.58%

0.82

5.

Palo Alto, Calif.

762

4.14%

667.73%

14.70%

31.15%

0.57

6.

Saratoga, Calif.

771

3.38%

591.18%

15.10%

19.29%

0.29

7.

Chevy Chase, Md.

757

4.95%

476.55%

16.27%

28.86%

0.58

8.

Foster City, Calif.

758

3.58%

515.26%

17.08%

25.96%

0.94

9.

Sunnyvale, Calif.

745

3.37%

592.74%

21.63%

27.13%

1.05

10.

McLean, Va.

757

4.51%

450.78%

16.40%

23.59%

0.76

Top cities in states surrounding Illinois

Rank

City

Median
credit score

Credit card
debt-to-income
ratio

Mortgage
debt-to-income
ratio

Student loan
debt-to-income
ratio

Car loan
debt-to-income
ratio

Average
No. of late payments

53.

New Berlin, Wis.

759

5.58%

342.89%

28.79%

40.30%

1.13

71.

Chesterfield, Mo.

762

6.22%

445.19%

30.13%

47.94%

1.02

98.

Carmel, Ind.

760

6.59%

384.81%

25.28%

38.97%

1.20

150.

Bettendorf, Iowa

738

6.17%

305.63%

35.63%

39.53%

1.65

711.

Owensboro, Ky.

668

7.48%

339.53%

51.38%

56.82%

2.3

Top five cities in Illinois

Rank

City

Median
credit score

Credit card
debt-to-income
ratio

Mortgage
debt-to-income
ratio

Student loan
debt-to-income
ratio

Car loan
debt-to-income
ratio

Average
No. of late payments

57.

Northbrook

762

5.63%

467.73%

22.53%

42.18%

0.92

58.

Buffalo Grove

747

5.49%

342.85%

25.88%

41.68%

1.41

70.

Wilmette

767

6.95%

530.04%

22.77%

25.59%

0.86

109.

Deerfield

756

7.91%

491.02%

24.41%

42.59%

0.81

110.

Arlington Heights

749

5.54%

422.11%

29.23%

43.93%

1.22

Rockford-area cities

Rank

City

Median
credit score

Credit card
debt-to-income
ratio

Mortgage
debt-to-income
ratio

Student loan
debt-to-income
ratio

Car loan
debt-to-income
ratio

Average
No. of late payments

768.

Freeport

686

8.34%

269.50%

59.03%

75.06%

2.30

1285.

Belvidere

673

7.85%

394.31%

49.72%

57.26%

2.06

1407.

Loves Park

673

6.76%

262.97%

45.05%

71.49%

2.67

1483.

Rockford

647

7.58%

300.19%

50.37%

74.53%

2.53

2133.

Machesney Park

666

7.17%

269.34%

47.82%

54.46%

3.31

When you look at the data, the only criteria that somewhat helps Rockford-area communities is our relatively low cost of housing. Otherwise, local families are saddling themselves with too much credit card, student loan and car loan debt.

To shore this up a bit, I’ve averaged out the scores from the top 10 overall cities, top in Illinois and then the five local communities big enough to be ranked.

Averages

Area

Credit Score

Credit Card
Debt

Mortgage
Debt

Student Loan
Debt

Car Loan
Debt

Avg. Late
Payments

Top 10 cities

763

3.88%

514.08%

15.79%

24.13%

0.64

Best cities surrounding Illinois

737

6.41%

363.61%

34.24%

44.71%

1.46

Top 5 Illinois cities

756

6.30%

450.75%

24.96%

39.19%

1.04

Rockford-area cities

669

7.54%

299.26%

50.40%

66.56%

2.57

The amount of student loan debt-to-income and car loan debt-to-income is staggering. Undoubtedly, a college education remains the most effective way to boost a person’s future earnings. College costs though have been outpacing inflation for decades and many more middle- and low-income families have had to use loans to pay for that education.

Heavy student loan debt though costs graduates years of savings power. According to the Federal Reserve Board’s Survey of Consumer Finances, $53,000 in education debt leads to a wealth loss of nearly $208,000.

Car loan debt, next to credit card debt, is perhaps the most unnecessary. The average car loan now lasts 5 ½ years, meaning payments will last well into the years where maintenance and repair costs start to accumulate. Plus, cars lose significant amounts of value the minute they leave the dealership, causing most borrowers to be “upside down,” owing more than what they can sell their car or truck for, for the majority of the loan.

Undoubtedly, the relatively lower level of income of our area affects these rankings. If Transform Rockford is successful and a city showing increased educational achievement and falling crime is able to attract and grow upper-income jobs by 2025 it will automatically improve the ratios. Afterall, the amount someone pays for a Ford F-150 in Cupertino, California, isn’t much different from Rockford. The difference is how much is the buyer able to pay up front.

Still, debt is mostly a controllable cost. If someone has $2,000 saved for a car and decides rather than buying what that amount affords to buy a $20,000 car, well, that means essentially the first week of every month you are working to pay off that vehicle. It’s a matter of priorities and what the data above shows is that too many people prioritize instant spending over long-term financial independence.

 

 


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