It’s been well-documented that America’s banks and financial institutions are no longer the loose-and-easy lenders they were several years ago. But newly released data from the Federal Reserve Bank of New York reveals a less explored implication of that credit tightening: A new geographic divide in how easily Americans can borrow money.

Those who live in the upper Midwest, particularly Minnesota and the Dakotas, still have the healthy borrowing profiles they did before the Great Recession. Those in many other states have seen only modest declines in the ability to borrow. But those in the Deep South — especially in states hugging the Gulf Coast — have seen their access to credit drop off significantly, even though it was already weak to begin with.

The consequences of a credit freeze in the Deep South are daunting. The region is already economically distressed, with disproportionately high poverty levels, and restrictions on credit access limit the ability of those living there to start businesses, make investments, or manage unforeseen expenses. If enough people in an area cannot borrow, the community itself becomes less resilient, said Kausar Hamdani, a senior vice president at the New York Fed.

“It’s the ability to access resources,” Hamdani said. “Not just for emergencies, but to grow a dream, to start a business.”

The map below provides a snapshot of America’s credit picture in 2007 — the tale end of the credit bubble. At that time, 74.0 percent of Americans with a credit file borrowed on standard, revolving terms, using either a credit card or (for more significant needs) home equity line of credit.


By 2014, 67.9 percent of Americans were borrowing in that manner. But at the state level, the differences have become more stark, as seen in the next map. In Utah, 75.2 percent now use revolving credit (compared with 77.1 percent in 2007). In New York, the number is 74.9 (compared with 78.7 in 2007). And in Mississippi? Less than half — 49.3 percent — use revolving credit, compared with 62.5 percent in 2007. No other state saw a sharper decline during that span.


“Revolving credit,” as the New York Fed calls it, is just one barometer for credit access. But other data reveals similar geographic divides. The Deep South has a fewer percentage of prime borrowers and on-time bill payers than the rest of America. Mississippi ranks last in both categories.

It should be mentioned, of course, that not all borrowing is healthy. In the run-up to the financial crisis, there was a disastrous increase in the supply of mortgage credit, and individuals across America were stuck with loans they couldn’t pay back. Since then, lenders have become much more conservative. Though the pendulum swing was necessary, by some measures lenders have become even more cautious than they were in the years well before the financial crisis. Those who can’t borrow money through banks and other conventional channels are likelier to seek help from riskier sources, like payday lenders.

According to separate research from the Urban Institute, African Americans and Hispanics have been particularly affected by the tight credit conditions. Borrowing has dropped for African American and Hispanic households more sharply than for white households.