Skip to content

Monthly Archives: March 2015

Even Wealthy People Can Have Bad Credit

While it is not all that difficult to imagine lower income people with low credit scores that is not always the case. There are plenty of people who don’t make a lot of money who happen to have good credit scores. In a like manner, you might not think that wealthy people would have any worries when it comes to their credit ratings. It turns out, though, that this is not true. There are plenty of very wealthy people in this country who have issues with their credit scores. It is at the point right now where even the rich need to be concerned about their credit scores, just like everybody else.

The recent economic problems that have taken place all around the world have put a lot of emphasis on credit scores, which, when they are on the lower end of the spectrum can limit a person’s access to obtaining loans, getting decent insurance rates and even getting hired for a new position. Many wealthy folks have actually hurt their credit scores without being aware of it. By making late payments, charging too much on credit cards and not using credit enough because of their higher income levels.

The bottom line is that being wealthy does not always mean that someone is necessarily wise when it comes to credit. Contrary to popular belief, a person’s savings and income don’t factor into their credit scores.

A financial advisor named Jeremy Portnoff said, Regardless of their finances, age, gender or ethnicity, people don’t have an understanding of how credit works. They should be aware of their scores, especially in this environment.” Mr. Portnoff went on to describe a client of his, who had more than a million dollars in assets, but still had a poor credit score. This person avoided borrowing money, rented his house and never used credit cards. These factors all worked together to create a sub par credit score and may hinder the person from getting a mortgage in the near future. Like many other people, this guy grew up with the belief that all credit was negative.

The credit crisis has made people of all economic classes more susceptible to lower credit scores. Everybody needs to have a good to excellent credit score to receive loans and to ultimately keep borrowing costs down for the entire country. Scott A. Beaudin, a financial advisor explained it like this, “We think the limit is at least 760 to qualify for the best rates.” Some people just don’t know how to build their credit scores, and many more don’t know how to keep their credit scores high over the long run. This is true for people who are rich just as it is true for middle and lower income households.

When the time comes to get a mortgage or to buy insurance, lower credit scores can be extremely harmful to wealthy people. If you have more assets, you have more of a need to insure them. But if your credit score is not up to snuff, the insurance companies will rake you over the coals when it comes to insurance premiums. No matter how much money you make, it is never a good thing to pay more for insuring your property than you ought to.

Credit scores generally range from about 300 points to 850 points. The sad fact of the matter is that most people don’t even have a clue about what their credit scores are until they apply for a loan. There is no excuse to be out of the loop when it comes to your credit score, as everyone is entitled to obtaining at least one free copy a year according to federal law.