Do Rich People Have Better Credit Than You?

Your credit score isn’t about how much money you have. It’s about how you manage it.

So in answer to this question: No, rich people do not necessarily have better credit than you do. Having a lot of money can be helpful, but it is in no way the secret to a high credit score.

The Income-Credit Score Relationship

You can be a millionaire and have a terrible credit score. In fact, your income has no direct effect on your credit scores, because they’re based on credit reports, which don’t include income information.

The most important aspects of your financial behavior factored into your credit scores are payment history and debt usage. Debt usage refers to how much of your available credit you use, so if you have a $2,000 credit limit, you want to keep your balance below $600, or at a 30% credit utilization rate. The lower that percentage, the better.

Here’s where income could help: Having more cash at hand means you could qualify for a higher credit limit, meaning you have more room to spend before hitting that 30% utilization threshold. Of course, having money might mean you wouldn’t have trouble paying your bills, which is also important.

Looking at the big picture, states with higher median incomes tend to have higher average credit scores. Household income estimates for 2012 from the U.S. Census Bureau and average VantageScores gathered from Experian-Oliver Wyman Market Intelligence Reports and Experian’s IntelliView tool show a loose correlation between income and credit scores, but there are some notable exceptions. Maryland, which has the highest median income, isn’t even in the top half of states with the highest average credit scores. The VantageScore data (VantageScore is one of the common credit scoring models used by lenders) was pulled from the second quarter of 2013, the most recent data available.

But knowing what you can afford and budgeting for responsible credit card use means you can pay your bills and use a low amount of your available credit, which will improve your credit scores. You can see how your habits have affected your credit scores by looking at your personal Credit Report Card — it’s free and shows what areas of your credit portfolio are hurting or helping your scores. No matter the number on your paycheck, good credit reflects good behavior.

“There are a surprisingly large number of rich deadbeats,” said Rod Griffin, Experian director of public education. He said he’s been asked by consumers with a lot of money why their credit scores are terrible: “It’s because you’re not getting your credit card bill paid on time, or you’re not paying your utility bills on time, and you’re maxing out the credit cards that you have.”

It’s Not All About Credit Scores

While income has no impact on your credit scores, it comes into play when you’re applying for loans or credit cards. Lenders consider your ability to repay the debt, which is why you’re asked for your income on loan applications. Still, having a chunk of disposable income on your application may not overpower a history of late payments and maxed out credit cards.

“Regardless of your income or assets, the way that you use your credit will determine whether or not you have good credit scores and whether or not you’re a good credit risk,” Griffin said.

Improving your credit score requires a long-term plan, but there are small steps you can take toward better numbers. The biggest thing is to get started on making changes.