That's the headline over at The Wallet, a Wall Street Journal blog that I read daily. According to the story, the average credit score rose slightly in February -- to 678 from 676 in January. The Wallet was citing the U.S. Credit Score Climate Report, which is published by Credit Karma, a company that provides free credit scores at its Web site.
From the story:
The U.S. Credit Score Climate Report, which included 24,000 Credit Karma users, found the average score of those surveyed rose slightly in February, to 678 from 676 in January.
Particularly encouraging, the percentage of the participants seeing an increase in their score rose — to 39% in February from 37% in January — while the percentage seeing a drop fell — to 29% from 31%.
But don’t rising unemployment and shrinking credit lines suggest scores should plunge? Yes, probably. But these same factors have made consumers wary of taking on more debt and have prompted many to save money and curb card use.
“The effect of lower spending and credit is dwarfing the effect of reduced credit lines and reduced credit in the economy,” says Kenneth Lin of CreditKarma.com, which tracks the credit scores of over 250,000 users. “The more dominant effect is savings and less reliance on credit.”
My questions: where do these scores come from? Are these FICO scores? Are they the PLUS scores produced by Experian? I couldn't find the source of these scores on Credit Karma's Web site (though it may be there). After doing some digging, I finally figured out that Credit Karma uses TransUnion's TransRisk score (see interview with CEO of Credit Karma here. These are scores that lenders generally do not use. In fact, if anyone knows of a lender that uses TransUnion's TransRisk score, please let me know. For the record, most lenders -- some 90% -- use the score developed by FICO. Full disclosure: I have a financial relationship with FICO; if you buy a score using a link from my blog, I get a commission from the sale.
While I found The Wallet's story interesting, it would have been useful if it had mentioned that the credit scores highlighted in the story are those that can and should be ignored by consumers. I wish the Wallet would have told me why I need to care about Credit Karma's latest data.
You can read the rest of the Wallet's story here (link).