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The Georgia Experiment Has Failed

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For starters, let’s look at the original premise of the law, to protect Georgia consumers from scam credit repair companies. Have you ever heard of a scammer who was afraid to break a law – or even cared about the laws? The law just stopped legitimate and reputable credit repair companies from offering services in Georgia. Although the scam companies continue to prey on Georgia consumers to this day; reputable and legitimate credit repair services are not available in Georgia.

How have Georgia Consumers fared over the last decade with limited access to credit help?  According to a recent 2018 study by Experian, Georgia is the 3rd worst credit score in the country!  My first thought when I looked at that figure was that maybe Georgia is just a poorer state and the residents don’t have a lot of income to pay their bills.  After a quick Google search I found that Georgia is 29th in the country for median income.  Hmmm, a decent income yet very low credit scores could this be because Georgia Consumers do not have access to the same credit help that Consumers in every other state have access to?

Alright so Georgia has very low credit scores – what’s the big deal? For starters, it has affected Georgian’s ability to own a home.  Georgia ranks 40th in the country for homeownership rates according to the US Census Bureau. Fortieth is really even lower than it seems when you take into consideration some states that are very low because of high median home prices such as Hawaii with a median home price of $631,700, California with a median home price of $546,800, Massachusetts with a median home price of $400,700, and New York with a median home price of $325.000. Obviously, very expensive homes will make home ownership difficult. But with Georgia’s median home price sitting at a modest $188,900 why are Georgians having such a tough time acquiring home ownership?  The answer is again those low credit scores which are keeping a significant percentage of Georgians from credit qualifying for home loans.

For comparison let’s look at Vermont which has a median income at number 21, a little better than Georgia’s 29th.  But Vermont has the 2nd best credit scores in the country which has led to the 2nd best homeownership rates in the country driving median home prices up (more buyers available) to $233,100. Another state to look at is Maine who ranks 24th in median income as compared to Georgia’s 29thMaine however has the 13th best credit score which has propelled it to number 6 in the homeownership rate and a median home price of $197,500.

Let’s look at a state with almost the same median income and median home price, Wisconsin.  Wisconsin’s median home price is $188,500 virtually identical to Georgia’s $189,900 and a median income of 24th on the list which is pretty close to Georgia’s 29th.  With those two similarities, the only difference is in the credit score where Wisconsin has the 7th best in the country which has propelled them to number 20 on the homeownership index as opposed to Georgia’s 40th.

Let’s look at a couple of other states who have lower income and credit scores and see how they rank on the homeownership scale.  South Carolina is 43rd on the list of median income – substantially poorer than Georgia, with average credit scores that are the 7th worst in the country which are pretty close to Georgia’s 3rd worst.  So how did South Carolina fare on the homeownership index – pretty well, coming in at 12th! So how did South Carolina do it? The answer is simple with a median home price of $170,800. In this example if Georgia wants to increase its homeownership rate like South Carolina, it could do so by a decline in the median home price which no one wants!  Another example of this is Alabama.  Alabama has the 46th worst income, tied Georgia for the 3rd worst credit score, yet still came in 16th in home ownership by having an extremely low median home price of $147,900.

Is Georgia right and the other 49 states in the country wrong?  Should Credit Repair be illegal unless you are a nonprofit or an attorney?  I don’t think so.  I feel that many other states have done the right thing and allowed reputable credit repair companies to operate in accordance with the Federal Law: The Credit Repair Organizations Act which was devised and implemented by the Federal government to regulate Credit Service Organization.

Georgia has tried the “experiment” of making credit repair illegal in the hopes of protecting Georgian consumers but it has backfired.  Georgians are suffering from low credit scores which has hurt them when it comes to things like home ownership.

More information:

Matt Liistro

SOURCE Georgia Credit Repair Trade Association

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Source: on 2021-01-12 10:11:15

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