What is THE average credit score?

Last month, in what seemed like a big scoop over its rival news agencies, the Associated Press reported that, now, 25.5% of Americans have FICO scores below 600.  But, the score model in that report is a new score, FICO 8 (BEACON 09), which is not sanctioned by the two big housing finance agencies, nor even the one sold to consumers by the main scoring company.  The story stuck.  Following questioning by creditscoring.com, FICO (the company) removed FICO (the score) distribution charts from its website.

This month, rival news agency Reuters struck back.  On Friday, in her story “Scorning debt, consumers’ credit scores soar,” Helen Chernikoff wrote, “The average credit score rose to 704 in July, a level not seen since the first quarter of 1998, according to data that Equifax Inc (EFX.N), one of the largest U.S. credit bureaus, provided exclusively to Reuters.”

To what score model she refers is unclear.  In the article, 850 is the highest score on the scale, but there is no mention of the lowest.  So, to the average person, the model might look like the broad-based risk FICO credit bureau score BEACON 5.0 available to consumers at myFICO and required by Fannie Mae and Freddie Mac.

Or, it could be something else.

That is because the consumer reporting agencies play a childish game with numbers, creating credit scores with scales similar to that of the well-known FICO score, 300-850.  TransUnion even makes one, called Transrisk, that has exactly the same scale as the FICO–300 to 850.  There’s PLUS at Experian (330-830).  And, in the case of the company that is subject of the fabulous exclusive Reuters story, there is the Equifax Risk Score 3.0 (280-850).

Illinois governor: Employers use credit score

The national consumer reporting agencies all state that they do not provide credit scores for employment purposes.

In spite of that, as Governor Pat Quinn of Illinois signed a bill into law, he used the word “score” twice.  State Senator Don Harmon piled on.



Quinn (2:23):  “… will not allow employers to use credit score to decide whether or not somebody is going to get a job or somebody is going to get a promotion.”

Harmon (3:25) :  This bill strikes an appropriate balance.  It says, as a general principle, employers can’t use your credit history, your credit score, in determining whether or not to hire your or promote you.

Quinn (4:21):  “Unfortunately, some employers are using credit score of an individual person to decide whether someone gets hired, or someone gets retained on a job, or someone gets a promotion on that job.”

The new law, however, allows credit history use in the case of an “established bona fide occupational requirement.” 

The Chicago Tribune reported, “[Rep. Jack] Franks said a lobbyist working for TransUnion ‘duped him’ into replacing references to ‘credit history’ with ‘credit scores,’ which are not used in hiring.”

An official of Consumer reporting agency TransUnion testified in Oregon, “There’s no such thing as a credit score in employment.”  TransUnion is based in Chicago. 

At least, somebody is contolling the message in this messy state’s heady merry go round.  The governor’s press release does not include the word “score.”  But give him a break.  He didn’t run for the job.

Federal Reserve and Credit Karma statistics

On August 6, the Federal Reserve said, “Revolving credit decreased at an annual rate of 9-1/2 percent, and nonrevolving credit was about unchanged.”

On August 11, Credit Karma reported, “Nationally, credit card debt amongst consumers with a credit card decreased by one percent since June 2010. However, credit card debt is up nearly 14 percent since July 2009.”

“Consumers have charged more on their credit cards and as a result, credit scores are lower,” [Credit Karma CEO Ken] Lin said. – San Francisco Business Times

NBC TODAY: Employers use credit scores

The consumer reporting agencies all state that they do not provide credit scores for employment screening.

However, last month on NBC, “TODAY” host Matt Lauer introduced a segment with this line:  “This morning on TODAY’S MONEY, five ways to improve your credit score. It impacts all areas of your life from getting loans to how much you pay for insurance, even whether or not you might get a job.”

The interviewee, “TODAY” financial editor Jean Chatzky, does not disagree with Lauer’s statement.

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Earlier this year on ABC‘s “Good Morning America,” George Stephanopoulos said that your credit score is the key to getting a good job.  CBS did the dubious deed three years ago.