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Credit score mystery

By Janna Herron · Bankrate.com
Friday, December 16, 2011
Posted: 2 pm ET

Now here's a head scratcher.

The latest numbers from consumer credit advocate CreditKarma.com released Wednesday show that total consumer debt (credit card, mortgage, auto and student loans) dipped more than a half-percent to an average of $223,379 in November from $230,841 at the beginning of this year.

The result on the average credit score? A counterintuitive five-point decline to 661 from 666.

That's not the only puzzle. Mississippi residents, who have the lowest average credit score in the country, got short-ended too. Debt for the average Mississippian totaled $155,205 in November, down 3.2 percent from $160,292 in January.

But what happened to their credit score? It also fell 9 percentage points to 622 from 631.

(The state also should get props for being the nationwide leader in slashing credit card debt from January to November. It cut its average balance by 16 percent to $5,362.)

The Magnolia State has some unlucky company. The phenomenon of reducing debt to the detriment of the credit score repeated itself in 29 other states from January to November, according to CreditKarma's data.

In fact, the only state that saw an increase at all in its average credit score was Montana. It rose 4 percentage points to 661 from 657, while its residents piled on an extra $6,419 in debt during that time. Huh?

Of course, there are many factors besides total outstanding debt that goes into the complicated calculus that spits out a credit score. Aside from how much you owe, credit scores consider if you consistently pay on time, the length of credit history, if you've opened new account and the mix of credit on your report.

These factors all could have had a bearing on the outcome on state averages along with the study methodology, which compares the current user base of CreditKarma to that of the user base in January. The pool of people may have changed.

In any case, what matters is your individual relationship with credit. The best place to start is with your credit report. Did you know you could pull your credit report for free from each of the major credit bureaus once every 12 months at AnnualCreditReport.com?

Once you pull your report, check it for errors. Then follow this simple advice to better credit: Pay down debt and pay on time. Here are some other helpful tips from Bankrate.

What does your state's credit score look like, and how does it compare to yours?

Follow me on Twitter: @JannaHerron.

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