Introduction

On January 8th, WalletHub released its most recent estimate of average credit scores across the states. In every state, the average credit score dropped compared to the prior year as households, some of the most indebted in human history, continue to struggle with rising debt, moderate interest rates, and higher living costs.

How does Arizona compare? Down 1.04%, Arizona’s credit scores dropped the 10th fastest among states. Overall, the average credit score in the state is 666, ranked 30th among states (e.g., in the bottom half of states for credit scores). One reason for the not-so-great credit picture is housing affordability. Arizona’s mortgage debt per capita is 22% higher than the national average, as housing prices and mortgage rates continue to weigh on households. Policies aiming to improve housing affordability may also have a secondary effect—improving Arizona’s credit picture. What follows is a comparison of average credit scores, household debt burdens, and early signs of payment distress through a new “household liquidity resiliency” measure.

Figure 1

Key Findings

• Average credit score in Arizona dropped the 10th fastest (-7 points) among states in 2025.
• At 666, Arizona ranks 30th among all states for average credit score—meaning it is in the bottom half of states for average household credit rating.
• Arizona has seen the second largest increase in per capita debt since 2003 among the 11 states reported, up 129% to approximately $74,000.

• For the fourth quarter of 2025, Arizona stands out for three areas with debt per capita well above the national average:
  • Arizona’s mortgage debt per capita is 22% higher than U.S. average.
  • Per capita auto loan debt is 7% above the national average.
  • Credit card debt is 8% above the national average.

• Arizona has surprisingly high account delinquency rates compared to the national average (percent above national average in parentheses):
  • (1) 30 days late ($1,050 per person past due, 36% more than average),
  • (2) 60 days late ($390 per person past due, 31% more than average),
  • (3) 90 days late ($360 per person past due, 78% more than average), and
  • Derogatory ($1,240 per person past due, 27% more than average).
• Using CSI’s newly developed Household Liquidity Resilience measure (HLR), the CSI HLR says Arizona households are 23% less prepared for potential credit crunch problems than the average U.S. household. This lower preparedness stems from generally higher than average debt, higher delinquency, and a lower cash cushion that the average U.S. household.

Household Balance Sheet and Debt Stress

The drop in credit scores across every state corresponds with rising household debt. According to the New York Federal Reserve, household debt grew to $18.8 trillion at the end of 2025 (growth since 2024 in parentheses), driven by $13.2 trillion in mortgage debt (+4.5%), $1.3 trillion in credit card debt (+5.5%), and $1.7 trillion in auto loans (+0.7%). Student loan balances increased to $1.7 trillion (+3.0%). 

The most recent data confirms the average household’s balance sheet isn’t improving. In fact, when comparing the 11 states reported by the New York Federal Reserve since 2003, Arizona’s households have seen the second largest increase in per capita debt at 129%, surpassed only by Texas at 148%.

Figure 2

About three-fourths of the rise in debt across the state can be directly attributed to mortgage debt. For the 11 states with reported information for the fourth quarter of 2025, Arizona stands out for its per-capita mortgage debt which is 22% above the U.S. average. Arizona also has slightly (7%) higher-than-average auto loan and credit card debt (8%) relative to income, compared to the United States overall.

In contrast to higher-than-average mortgage, auto, and credit card debt, on a per capital basis, Arizona has lower-than-average education-related debt, with higher education revolving debt 3% below the national average and student loan debt 8% below the national average.

Figure 3

The recent rise in debt relative to other states shows up in the delinquency statistics. Arizona has surprisingly high delinquency amounts compared to the national average for accounts that are (1) 30 days late (36% higher than the U.S. average), (2) 60 days late (31% higher than the U.S. average), (3) 90 days late (78% higher), and Derogatory (27% higher).

While it is reasonable to expect higher delinquency rates in Arizona relative to the United States due to its higher relative debt loads, the actual observed rates are significantly higher than what can be explained by the debt rates alone.

Figure 4

A New “Household Liquidity Resilience” Index

Average credit scores can offer valuable information on how financially resilient households in a state may be, but this measure alone is imperfect. Other measures matter as well, such as debt service to income, credit utilization rate, delinquency probability, and liquidity buffers. Assuming that these measures act as signals of broader economic success or weakness, CSI developed a new index – the “Household Liquidity Resilience” (HLR) measure—to capture how liquid consumers are across states.

The HLR equally weights four factors to gauge the health of household liquidity across a state: the debt service to income ratio, the credit utilization rate, the delinquency probability, and the liquid buffer months reserve inverse. Overall, the CSI HLR says Arizona households are 23% less prepared for potential credit crunch problems than the average U.S. household. This lower preparedness stems from generally higher than average debt, higher change of delinquency, and a lower cash cushion that the average U.S. household.

Figure 5

The Bottom Line

Overall, debt across the state continues to grow, and is doing so faster than most other states. Behind the rise in the state’s relative debt burden is above average mortgage debt, a clear nexus to the state’s ongoing struggle with housing affordability. The rise in debt explains why Arizona saw the 10th largest drop in households’ average credit score in 2025.  Policies that improve housing affordability may also help improve Arizona’s below-average debt and credit picture, but CSI’s newly created “Household Liquidity Resilience” index suggests the state’s credit crunch is likely to continue to be a problem in 2026.

Appendix: Household Liquidity Resilience Index

The definition of the Household Liquidity Resilience Index is as follows: 

Household Liquidity Resilience Index= 1w1Debt ServiceIncome+w2∙Credit Utilization+w3∙Deliquency Probability+ w4∙Liquidity Buffer Months Inverse

where Debt ServiceIncome captures the ability to repay debt service, Utilization Rate captures the rate at which debt is used, Deliquency Probability captures the probability of delinquency, and Liquidity Buffer Months Inverse captures the amount of liquid reserves available to use as a buffer in times of stress.