Why the Credit Score Drop in All 50 States Matters for Homeowners Planning Ahead

A person's credit score has a major impact on finances, especially for a homeowner or someone who plans to become one.

A higher score opens the doors to lower mortgage interest rates and other money-saving opportunities that can add up significantly over time. A lower score creates hurdles to homeownership and limits avenues to upgrade an existing home.

Unfortunately, a study by WalletHub shows that credit scores fell across the U.S. over the past year, potentially making homeownership even more expensive than it already is.

Here’s the good news: By being proactive and keeping your credit in check, you can access better rates and keep more of your hard-earned money in your pocket. Plus, there are steps you can take now to boost your score, if you're one of the folks who saw a decline last year.

Falling credit scores are a national issue 

According to WalletHub, all 50 states saw average credit scores decline from the third quarter of 2024 to the third quarter of 2025. 

The most significant credit score drop occurred in Missouri (-1.51%), followed by Georgia (-1.36%), Delaware (-1.20%), Kansas (-1.18%), and Minnesota (-1.17%).

WalletHub reveals that, surprisingly, the median credit card debt in Missouri is $2,622, which is the 16th lowest in the nation. Additionally, Missouri ranks 25th for financial distress, indicating that payment behavior and missed payments are likely the real culprits. 

Similarly, Georgia shows high levels of financial distress, again highlighting that payment behavior, rather than total debt levels is the primary issue. 

How a lower score can turn homeownership into a money trap

“The greatest impact a current homeowner, or future homeowner, will feel from a falling credit score is a higher mortgage rate, which is a high cost to consider when financing a home,” says Leslie H. Tayne, finance and debt expert and founder of Tayne Law Group in Melville, NY.

In general, mortgage lenders reserve the best rates for borrowers with strong credit profiles and consistent financial habits. When your credit score drops, lenders view you as a higher-risk borrower, and charge higher interest rates to offset that risk. 

“With mortgage rates already elevated, a falling credit score can make purchasing a home even more expensive by pushing you into a higher rate tier and increasing the interest rate you qualify for,” explains Tayne.

If and when you decide to refinance, a lower credit score can also mean fewer options and less favorable terms. Also, if you wish to borrow against your home equity in the form of a home equity loan or HELOC, for example, it can be difficult to do so with a lower score. If you do get approved, your rate will likely be higher, costing you more in the long run.

In addition, insurance costs can become more expensive.

“Many insurers use a credit-based insurance score when setting premiums, and your credit history can play a role in that calculation. A lower credit score can cause your rates to skyrocket,” adds Tayne.

What you can do to protect or rebuild your credit

If you own a home or want to in the near future, there are ways you can build and maintain a strong credit score and, in turn, reduce the cost of ownership.

“All it takes is simple, hard-nosed discipline,” explains Matt Schwartz, mortgage broker at VA Loan Network in Southlake, TX. 

First off, keep your credit card balances low. A good rule of thumb is below 30% per credit card but of course, the lower the better. 

“Next, don’t open or close credit lines unless absolutely necessary and make every bill automatically payable to avoid having one late payment recorded against you,” says Schwartz.

If you had outstanding balances when prices were rising and inflation was in full swing, Schwartz recommends you pay those off first—they’re likely costing you a lot more due to higher rates and reduced purchasing power. 

“Don’t forget to go to AnnualCreditReport.com to check your credit reports annually for free. Mistakes are common, and correcting even one mistake can boost your credit score by dozens of points,” adds Schwartz.