Does Salary Affect Credit Score?


Credit score Q&A: “Does salary affect credit score?”

The short answer is NO.  Your salary does not affect your credit score, as it doesn’t even show up on your credit report.

And if something doesn’t show up on your credit report, it won’t have any effect on your associated credit score.

However, employment history does show up on your credit report, though it doesn’t detail anything about your salary or wages.

It will only display former and current employers, their contact info, and your position at the company.

You may have noticed that many of these descriptions are often riddled with errors because the information is typically provided by YOU when you apply for credit cards and other loans over time.

And remember when you didn’t answer the question very accurately? Or embellished a little bit?  Or said you were self-employed or a student? Well, that information can come back to haunt you.

Your Salary Is a Secret

The good news is your less-than-stunning salary won’t have any negative (or positive) effect on your credit scores (yes there are three credit scores) because credit score providers don’t know how much you make.

For those of you bringing home the big bucks, doing so won’t get you any closer to the highest credit score out there (850 for FICO score, 990 for VantageScore).

When it comes down to it, things like race, ethnicity, gender, marital status, employment, and income are not part of your FICO score.

So you could be making a million dollars a year while sporting a terrible credit score. The two don’t always go hand in hand, despite what you may think.

In fact, credit card companies don’t typically verify income, though that’s beginning to change.

There is word that the credit bureaus have gotten in on the “income estimation” business as well, so creditors will be able to get estimates of your income.  However, this still won’t have any bearing on your credit score directly.

Indirect Salary Effect?

Of course, salary may have the indirect effect of fewer credit card approvals for those with low incomes versus those who make lots of money, but it won’t be part of any of the credit score providers’ algorithms just yet.

Clearly there’s some sort of positive correlation between high salaries and high credit scores, since a major component of credit scoring involves paying bills on time. And you can’t pay your bills unless you make an adequate amount of money.

In other words, those with plenty of money are probably more likely to pay their bills on time each month, which should lead to higher credit scores, though it’s not a perfect science.

Paying on time is just one of several factors that determine credit scoring – amounts owed, length of credit history, amount of new credit, and type of credit also come into play.

So make sure you pay bills on time each month, keep balances low, apply for new credit sparingly, and mix it up a little to ensure you wind up with a good credit score!

In summary, your salary doesn’t directly affect your credit score, though it can play a role in how you pay your bills, which could ultimately make an impact on your credit score.

Also note that if your income is lacking, it could lead to a declined credit card application because credit scoring is just one piece of the approval pie.

Credit card issuers also need to know that you have the necessary funds to pay your bills. This is why they ask what your income is on credit card applications. Your salary is also used to set credit limits.

Tip: How to raise your credit score.

By Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.

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