Texas Tops List of Most Financially Distressed States in 2025

Key Takeaways

• Texas ranks 1st in financial distress in 2025 with high bankruptcy rates and low credit scores.
• Housing affordability crisis worsens with a 40% price increase and 306,000 home shortages in Texas.
• Texas offers strong job growth and no state income tax but faces rising costs and financial stress.

When considering where to live, work, or invest as an immigrant, understanding the financial health of a state is just as important as knowing about job opportunities or community support. In 2025, Texas stands out for both its strong economy and its high level of financial distress among residents. This creates a complex situation for immigrants and long-term residents alike. To help you make informed decisions, this comparison will break down the financial distress situation in Texas, using the latest WalletHub data, and compare it with other states facing similar challenges. We’ll look at the requirements, timelines, and costs of living in Texas versus other top financially distressed states, explore the pros and cons for different groups, and offer practical recommendations for those considering a move or investment in Texas.

Understanding Financial Distress: What Does It Mean for Immigrants?

Financial distress refers to the struggle individuals or households face when they can’t meet their financial obligations. This can include falling behind on bills, having low credit scores, or even filing for bankruptcy. For immigrants, financial distress can affect everything from the ability to rent or buy a home, to qualifying for loans, to long-term stability and integration in the community.

According to the July 2025 WalletHub report, Texas is the most financially distressed state in the United States 🇺🇸 for the second year in a row. The report uses nine different metrics, such as average credit scores, bankruptcy filings, and the number of accounts in forbearance (where payments are temporarily paused or reduced). These factors paint a clear picture of the financial challenges facing Texans, including many immigrants.

Comparing Texas to Other Financially Distressed States

Let’s look at how Texas compares to the other top states on WalletHub’s list for 2025:

Top 5 Most Financially Distressed States (2025):
1. Texas
2. Florida
3. Louisiana
4. Nevada
5. South Carolina

We’ll focus on Texas, but also highlight key differences and similarities with these other states.

Key Metrics Side-by-Side

What stands out: Texas leads in overall financial distress, with especially high rates of bankruptcy filings, distressed accounts, and low credit scores. While the other states also face serious challenges, Texas’s combination of rapid population growth, housing shortages, and rising costs makes its situation unique.

Requirements, Timelines, and Costs: Living in Texas vs. Other Distressed States

Housing Affordability

• Texas: Median home prices rose 40% from 2019 to 2023. As of 2023, there was a shortage of 306,000 homes. Mortgage rates peaked at 7.79% in late 2023. Homeowners insurance rates increased by nearly 19% over two years. These factors make it hard for many, especially immigrants and first-time buyers, to find affordable housing.
• Florida, Louisiana, Nevada, South Carolina: These states also face rising home prices and shortages, but Texas’s population growth and housing demand are especially intense. Florida, for example, has seen a surge in demand from retirees and remote workers, pushing prices up. Nevada and South Carolina have smaller populations but similar affordability issues.

Credit and Debt

• Texas: The ninth-lowest average credit score in the country and the third-highest number of accounts in forbearance or with deferred payments. This means many residents are struggling to pay bills or loans on time, which can hurt their ability to get new credit or rent housing.
• Other States: Florida and Louisiana also have low average credit scores and high rates of distressed accounts, but Texas’s numbers are among the worst.

Bankruptcy Filings

• Texas: Non-business bankruptcy filings increased by over 22% in the past year, the sixth-highest jump in the nation. This shows that many Texans are reaching a breaking point financially.
• Other States: Florida and Nevada have also seen sharp increases, but Texas’s rise is especially concerning given its strong overall economy.

Cost of Living

• Texas: While Texas has no state income tax, rising housing and insurance costs are eating into this advantage. Everyday expenses like groceries, transportation, and healthcare are also rising, making it harder for families to save or get ahead.
• Other States: Florida and Nevada also have no state income tax, but face similar cost pressures. Louisiana and South Carolina have lower overall costs but also lower average incomes.

Pros and Cons for Different Groups

For Immigrants and New Arrivals

Pros in Texas:
– Strong job market: Texas continues to lead in job creation, especially in technology, healthcare, and energy.
– Large immigrant communities: Especially for Indian immigrants, Texas offers strong community support, cultural organizations, and business networks.
– No state income tax: This can help stretch your paycheck further.

Cons in Texas:
– Housing is hard to find and expensive: Many immigrants, especially those new to the country, struggle to find affordable homes or rentals.
– High financial distress: Low credit scores and high bankruptcy rates can make it tough to get loans, rent apartments, or build long-term stability.
– Rising insurance and living costs: These can quickly eat into savings, especially for families just starting out.

For Long-Term Residents

Pros:
– Economic growth: Texas’s economy remains strong, with a GDP over $2.6 trillion and ongoing investment in infrastructure and business.
– Opportunities for advancement: Many industries are hiring, and there’s room for career growth.

Cons:
– Financial stress is rising: Even long-term residents are feeling the pinch from higher costs and more debt.
– Risk of falling behind: Those with lower incomes or unstable jobs are at greater risk of bankruptcy or credit problems.

For Businesses and Investors

Pros:
– Business-friendly environment: Texas is known for low taxes, a large workforce, and a pro-business climate.
– Continued population growth: More people means more customers and workers.

Cons:
– Financially stressed customers: High levels of financial distress can reduce consumer spending and increase defaults on loans or payments.
– Housing shortages: Employees may struggle to find affordable housing, making it harder to attract and keep talent.

Policy Responses and What They Mean for You

Texas officials are aware of these problems and are taking steps to address them:

• Legislative proposals: Lawmakers are working to make it easier to build new homes, reduce property taxes, and remove rules that slow down construction.
• Business and economic initiatives: The state continues to invest in roads, schools, and job training to keep the economy growing.

However, these changes take time. If you’re considering moving to Texas, it’s important to understand that while help is on the way, the current environment is still challenging for many, especially those with limited savings or lower incomes.

Decision-Making Framework: Should You Move to Texas or Consider Another State?

When deciding whether to move to Texas or another state with high financial distress, consider the following:

1. Assess Your Financial Situation
– Do you have enough savings to cover higher housing and living costs?
– Is your credit score strong enough to qualify for a lease or mortgage in a competitive market?
– Are you prepared for possible delays or higher costs in finding a home?

2. Consider Your Job Prospects
– Does your field have strong job opportunities in Texas or another state?
– Are employers offering relocation help or housing support?

3. Think About Community Support
– Are there established immigrant communities or support networks in your chosen city?
– Will you have access to cultural, religious, or language resources?

4. Weigh the Pros and Cons
– Texas offers strong job growth and no state income tax, but faces serious financial distress and housing shortages.
– Other states like Florida or Nevada may offer similar job opportunities and tax benefits, but also face rising costs and financial stress.

5. Stay Informed
– Check official resources like the Texas Comptroller’s Office for the latest on housing, taxes, and economic conditions.
– Review WalletHub’s financial distress rankings and reports for up-to-date comparisons between states.

Practical Recommendations

For Immigrants Considering Texas:
– Budget carefully: Plan for higher housing and insurance costs. Save as much as possible before moving.
– Check your credit: Make sure your credit score is as strong as possible, as this will affect your ability to rent or buy a home.
– Connect with local communities: Reach out to cultural organizations or immigrant support groups for help with housing, jobs, and settling in.
– Monitor policy changes: Stay updated on new laws or programs that could make housing more affordable or provide financial relief.

For Those Already in Texas:
– Seek financial counseling: Many nonprofits offer free or low-cost help with budgeting, debt management, and credit repair.
– Explore assistance programs: Look for state or local programs that offer help with housing, food, or healthcare costs.
– Advocate for change: Join community groups pushing for more affordable housing and better financial protections.

Expert Perspectives and What Lies Ahead

Economists point out that Texas’s strong economy hasn’t translated into financial security for everyone. While businesses are thriving, many families are struggling with debt, high housing costs, and uncertainty about the future. Policy experts say that fixing the housing shortage and providing better financial education are key to reducing financial distress.

Business leaders remain hopeful about Texas’s future, but warn that if financial distress continues to rise, it could slow down growth and make it harder to attract new talent and investment.

As reported by VisaVerge.com, the situation in Texas is a reminder that a strong economy doesn’t always mean financial security for everyone. Immigrants and long-term residents alike need to weigh the risks and rewards carefully before making big decisions about where to live or invest.

Conclusion: Making the Best Choice for Your Situation

Texas offers many opportunities, from a strong job market to vibrant immigrant communities. However, the state’s high level of financial distress, driven by rising housing costs, low credit scores, and increasing bankruptcy rates, creates real challenges—especially for newcomers and those with limited resources.

If you’re considering Texas, take time to review your finances, research local conditions, and connect with support networks. Compare your options with other states facing similar issues, and stay informed about policy changes that could affect your future.

For more detailed information on financial distress and state rankings, visit WalletHub’s official website or consult the Texas Comptroller’s Office for updates on economic and housing policy.

By carefully weighing your options and planning ahead, you can make the best decision for you and your family—whether that means moving to Texas, choosing another state, or staying put and working to improve your financial situation.

Learn Today

Financial Distress → A situation where individuals or households struggle to meet financial obligations like bills or debts.
Credit Score → A numerical rating of a person’s creditworthiness based on financial history and payments.
Forbearance → Temporary pause or reduction in loan or debt payments approved to ease financial burden.
Bankruptcy Filings → Legal process allowing individuals to declare inability to pay debts and seek relief.
Housing Affordability → The ability of individuals to afford housing costs including mortgage, rent, and insurance.

This Article in a Nutshell

Texas leads U.S. in financial distress for 2025 despite economic growth. Rising housing costs, low credit scores, and bankruptcies challenge immigrants and residents. Evaluate finances, job prospects, and community support carefully before moving or investing. Stay informed on policy changes for better housing and financial stability prospects.
— By VisaVerge.com