Credit Myths Part 6: Having a High Income Helps Your Credit

Credit Myths Debunked Part 6: Having a High Income Helps Your Credit

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It seems logical that having a great, reliable income each month is something that can help boost your credit score. I mean, someone with lots of steady money coming in would be able to pay down debts, so they should be given a higher score, right?

Wrong. No matter how big or small your income is, it has no direct affect on your credit score, whatsoever. It is simply not one of the factors that are taken into account when coming up with your credit score at all. This is one of the most common credit myths.

The thing is, sometimes those guys with the huge paychecks are worse with their money than the blue collar modest income fella down the street. There are rich men in more debt than you can wrap your mind around, and poor men who’ve never missed a payment on a credit card or loan in their life. Your income does not determine your borrowing habits, and that is what your credit score is all about.

Your credit score is a way for potential lenders to understand how well you pay back money that you owe. When applying for credit from lenders, your income does play a role - they check this in addition to your credit score to see whether or not you have the means to pay back any funds they lend you. They then check your credit score to know if you’re likely to pay your debts back.

Your credit score tells your future lenders if you’ve defaulted on loans or debt in the past. Your credit score tell your future lenders if you make your payments on time, and if you pay your minimum payments. Your credit score tells your future lenders if you’ve had a bankruptcy or been in consumer proposal recently. Your credit score does not tell your future lenders whether or not you have the means to pay them back.

What Does it All Mean?

It all comes down to how you manage your money. For example, if you’re in a great deal of debt and you’re struggling to get out from under it, having a significant raise in your income can help you in a big way. If you use your increase in income to pay down your heavy debts faster, that will improve your credit score quite significantly.

As we said before though, a wage increase does not automatically equal an increase in your credit score. If you suddenly have a higher income, and you decide to fulfill your lifelong dream of owning 3 jetskis instead of paying your debts, your credit will definitely not increase. Neglecting your debts will have a negative affect on your credit, no matter how much money you take home.

It is important to remember that a high income does not equal a high credit score. It all depends on your own personal habits when it comes to debt.

Good habits = good score.

Bad habits = bad score.

It doesn’t get much simpler than that.

Did you know that income does not affect your credit score directly? Let us know in the comments!

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