The latest Credit Karma credit score data gives us a glimpse into the wallets of American consumers to see what kind of plastic they are carrying, and what kind of credit scores are attached to it. For example, Wal-Mart credit cardholders have an average credit score of 663, while Bloomingdale credit cardholders have an average credit score of 710.
Let’s be very clear here: T
hese relationships are not causal. Shopping at Bloomingdale’s doesn’t necessarily mean you’ll have a good credit score (tabloids have dished how terrible some celebrities’ credit scores are), and shopping at Wal-Mart doesn’t mean you’re bound to have a poor credit score.
But these findings do give an interesting look into the shopping habits and credit health of average Americans. Here are 3 interesting trends:
1. High-End Department Store Card Owners Have Higher Credit Scores
Nordstrom credit cardholders have an average score of 712 and Bloomingdale’s credit cardholders have an average score of 710. By contrast, Wal-Mart credit cardholders have an average 663 credit score and Target credit cardholders have an average 679 credit score. Interestingly enough, credit utilization rate (how much available credit cardholders are using) is roughly above 50% across the board.
2. The More Expensive the Retail Store, the Higher the Score
Old Navy, Gap, and Banana Republic are all national clothing brands owned by Gap, Inc. Old Navy is known as the most affordable of the brands, Gap’s price range is in the middle, and Banana Republic occupies the high-end, luxury status of the three brands. From most affordable brand to most expensive, Old Navy cardholders have an average score of 682, Gap cardholders have an average credit score of 694, and Banana Republic cardholders have the healthiest credit scores at an average of 708.
3. The Highest Credit Scores Belong to Hardware, Home and Garden
Here’s an unexpected find: Consumers with a credit card from Lowe's, The Home Depot, Sears, and Menards—all hardware or home and garden chain stores—all have credit scores above 700. This is a higher and more consistent category than luxury retail brands. Sears cardholders have a 706, The Home Depot cardholders have a 709, Lowe's cardholders have a 717, and Menards cardholders have the highest credit score on our list of retail cards—an average of 722.
Age and Life Stage
There are two likely explanations for these three interesting relationships: age and life stage. Younger consumers often buy less expensive brands such as Old Navy, while more mature consumers are more financially able to buy higher-end brands like Bloomingdales or Banana Republic. Older consumers have higher credit scores, on average, because they are more experienced and have longer credit histories.
Different life stages can be another explanation. For example, people with home and garden store credit cards are likely to be older and own a home. Home ownership in itself has higher credit requirements, making this group of consumer or more likely to have higher credit scores.
Avoid False Conclusions
These are intriguing trends between retail cards and credit scores we wanted to share exclusively with LearnVest readers, just like our data on trends of email domain to credit score ranking. Certainly, do not make these two false conclusions:
“If I Shop More, I Can Raise My Credit Score.”
Obviously, this mentality without any proper discipline only leads to more debt, which leads to a lower credit score. Not the goal.
"I Am My Retail Card."
Retail cards are just an indicator of credit. If your friend whips out her Target credit card to pay for lunch, you can’t assume you have a higher credit score than she does because you have a Home Depot card.
Keep working hard at bettering your credit health...just remember that a heavy-duty purchase at Menards or Lowe’s won't bring up your credit score.
Tell us in the comments: Do you agree with Credit Karma's analysis of credit scores and retail cards? Why do you think this pattern emerged?