Written by Janet Dedrick on July 11, 2011 in Credit  |   No comments

Regional Credit Trends Affected by Industry and Manufacturing
Janet Dedrick, Equifax Credit Team

You’ve probably heard about certain areas of the country—most notably California, Florida, and Nevada—being hit especially hard by the housing crisis. However, other parts of the country are seeing an economic impact tied to their local industry and manufacturing. In some of those areas, credit scores have been on the decline, and there has been substantial deleveraging as well. On the other hand, other areas have weathered the storm well, without major trouble.

Heartache in the Rust Belt

Major U.S. auto companies declared bankruptcy throughout the recession, and a myriad of auto suppliers went out of business or were forced to pull back production—a perfect example of a domino effect. While auto sales and auto loans are finally beginning to increase again, a look at specific regions highlights the ongoing Rust Belt stress.

One of the Rust Belt cities hit hardest by the recession is Ann Arbor, Mich., which has experienced sustained credit score and balance declines. Credit scores have declined over 33 months and balances have declined over 32 months, causing it to rank as one of the top Metropolitan Statistical Areas (MSAs) experiencing declines. In fact, credit scores in Ann Arbor are currently below pre-recession levels (711.7 in March 2011 versus 712.9 in March 2006). Additionally, balances today are down by $1.5 billion, which is a variation of more than 10 percent from the peak.

Flint, Mich., while not experiencing quite as dramatic credit score declines, has experienced the largest number of months of balance declines—38 . With such a sustained period of deleveraging, the Flint MSA has shed more than $2.3 billion of balances, or 17.5 percent from peak (Oct 2007).

The degree of deleveraging is further highlighted as balance levels today for both Ann Arbor and Flint are below the entire series tracked, starting with July 2005. Lansing, Mich.; Grand Rapids, Mich.; Dayton, Ohio; and Toledo, Ohio have similar balance decline patterns.

Improvement in tech center locales and the Research Triangle

While they were also affected by the recession, several major tech center locales did not experience the same issues that auto industry regions have seen. Cary, Durham, Raleigh, and Wilmington, N.C., did not trend toward lower risk scores nor did these locales experience sizable deleveraging. These locales are home to several colleges and universities, as well as what is known as the “Research Triangle,” which includes biotech and tech industries.
Compared to March 2006, a pre-recession point, balances in these cities have increased. Specifically, balances are 27 percent, or $15 billion, higher in the Wilmington MSA; 25 percent, or $10 billion, higher in the Raleigh MSA; and 17 percent, or $3 billion, higher in the Durham MSA.

Stability in the heartland and small metropolitan areas

Deleveraging did not occur in a handful of smaller metropolitan areas—again, primarily those with colleges, universities, and military bases. Such locations include Hunstville, Ala.; Fayetteville, N.C.; Clarksville, Tenn.; El Paso, Texas; and Killeen, Texas. These cities were immune to deleveraging during the Great Recession. Unsurprisingly, these areas have also seen stable employment as well as minimal impact from the housing crisis.

Additionally, other areas across the United States have experienced more stable score trends and only a minimal number of months of deleveraging. These locales, which have fewer than 10 months of balance declines, include Albany, N.Y.; Cedar Rapids, Iowa; Oklahoma City, Okla.; Omaha, Neb.; San Antonio, Texas; Scranton, Penn.: and Syracuse, N.Y.

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