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Despite concerns that credit card limit cuts would devastate consumers’ credit, scores nationwide seem to be holding steady, according to Credit Karma, a score-tracking site.

Credit Karma’s latest survey found 34% of consumers saw their credit score stay the same in June compared to 32% in May. Nationally, 28% of consumers saw their credit score decline in June, which is slightly lower than May. And 38% of credit scores increased.

Now, while Credit Karma doesn’t use the FICO scoring formula that most lenders use, the trend is interesting because it seems to confirm what FICO has said: Limit cuts are not hurting consumers as much as some have expected, because consumers are reining in their spending, reducing their balance and new purchases.
Some of Karma’s other findings:

  • The South as a region had the highest percentage of increasing credit scores, ending the Midwest’s four-month run at the top. In June, 39% of consumers in the South saw their credit scores increase; 28% of credit scores decreased; and 33% of credit scores stayed the same.
  • Michigan had the highest percentage of increasing credit scores during June at 41%; 27% of credit scores declined; and 32% stayed the same.
  • Texas saw the highest percentage of decreasing credit scores with 29%; 39% of Texas consumers credit scores increased; and 32% stayed the same.

Want to learn more about boosting your credit score? Check out my latest columns:

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2 Comments

1

Thanks for posting this Ms. Weston.

As I’m sure you’ve considered, both claims could be true. That is, AVERAGE scores could be holding steady, even as limit cuts are hurting the scores of a substantial minority of cardholders. If enough other borrowers are “deleveraging” such that their scores are going up, that effect could offset the negative effect of limit decreases.

Also, FWIW I’m skeptical that the Credit Karma proprietary scoring forumula accurately mirrors true FICO scores here. CK has an incentive to market their scores to consumers, and thus to promote hope over fear. FICO doesn’t have a similar incentive, since financial institutions and not “end users” are its target demo.

Cheers, Dave

2

I’m not sure it’s that calculated, but the “consumer education scores” do tend to skew higher for many folks than their actual FICO scores. And you’re right about averages. Although credit limit cuts have been on the rise, they still haven’t affected the majority of customers, and some of those they are hitting have been substantial drops in their scores.