Home > Credit 101 > Why Rich People Still Need Good Credit

Comments 1 Comment
Advertiser Disclosure


Wealth is pretty subjective: Average wage-earners can go through life debt-free and have money to spare upon retirement, while millionaires have been known to mismanage their finances and end up bankrupt. The figures on your paycheck carry you only so far, because business partners, employers and lenders won’t care how much money you make if you have a track record of financial irresponsibility.

That brings us to the subject of credit scores: You may think, “Hey, I’m rich, why should I care about my credit?” For the sake of the argument, let’s say your annual household income exceeds $200,000 — that included only 5% of the U.S. population in 2013, according to the Census Bureau, so it seems like a fair benchmark of exceptional wealth. For comparison: Median U.S. household income was $52,250 in 2013.

If you and your family have an annual budget of at least $200,000, you can probably afford some pretty nice things, even after accounting for student loan payments, taxes and regular bills. Given those costs, it could take you a long time to save the money needed to, say, buy a $400,000 home with cash, among other things. You either need to adjust your budget for strict savings or take advantage of financing options to break large purchases into smaller, affordable payments. Want to buy a house? You’ll probably need to get a mortgage. Looking at a new car? You might be able to afford an all-cash purchase, but otherwise, you’ll need an auto loan. If you’re into other sorts of luxury, you might need something like a boat loan or a pool loan.

All sorts of financing options exist to give people access to big-ticket items, but if you want to be approved for loans and qualify for low interest rates, you need good credit. You build good credit by making loan payments on time, keeping your debt balances low and applying for new credit sparingly. To keep up with how your financial behaviors affect your credit, regularly check your credit scores. You can see two of your scores for free on Credit.com, with updates every 14 days.

The effects of good and bad credit go beyond loan approval. If you’re applying for a new job, particularly something in finance, your potential employer may request your credit report as part of the hiring process (employers can’t check credit scores, just reports). In some states, credit standing impacts insurance premiums. If you’re looking to rent an apartment (plenty of wealthy people rent, particularly in expensive real-estate markets), the landlord is going to run a credit check before leasing to you. They won’t care how much money you make if you have a history of failing to pay bills on time.

Income makes up only a part of your financial security. You can burn up a high paycheck pretty quickly by paying high interest rates or needing to pay cash because you don’t qualify for financing. You can use this lifetime cost of debt calculator to see how much your credit will really cost you over the next several years. Your paycheck may not seem so big, after all.

More on Credit Reports & Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Shapira Sam

    200k a year is not even remotely “rich” so obviously that type of person would want to keep his good credit. but someone who is a multi millionaire couldn’t care less about their credit history.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team