It is a myth high net worth individuals don't need to worry about credit scores
Debt, Investments, Retirement, Strategies & Tips

Even the Well-To-Do Can’t Afford to Ignore Their Credit Score

Even the Well-To-Do Can’t Afford to Ignore Their Credit Score

It is a myth high net worth individuals don’t need to worry about credit scores

Credit scores are subject to misunderstanding, misrepresentation, and outright myth. For high net worth individuals, perhaps the most dangerous myth is that credit scores don’t apply to them. It is easy to see why someone with a lot of money might feel this way. In general, individuals with a significant net worth will have credit scores high enough never to be troubled by poor credit. Yet there are reasons even the most well-to-do should be conscious of their credit score:

Credit scores are used for more than just loans

Although the primary use of a credit score is to allow lenders a convenient way to evaluate risk, credit scores are reviewed by many other entities. Even if they never need to borrow money, high net worth individuals will still be judged by their credit scores when:

Applying for a New Job. Many employers will check the credit status of new hires. Some human resource software does this automatically.

Seeking Security Clearance. The United States Government uses credit ratings when it scrutinizes individuals for security clearance.

Renting an Apartment. Many landlords run a credit check before leasing apartments or renting other space.

Buying Insurance. Insurance companies commonly use credit scores to calculate premiums.

Subscribing to internet, TV, or cell phone services. Communications companies routinely check your credit before setting up service.

Gambling. When extending inhouse credit, most casinos will check your credit score along with verifying the amount in your checking account.

In general, the lower the credit score, the higher the costs and being wealthy does not guarantee a high score.

Wealth and income are not used to calculate credit scores

Credit bureaus automatically collect data from creditors who do business with them. In the process, the bureaus cast a pretty broad net. Together Equifax, Experian, and Transunion collectively make over 36 billion updates with data from over 18,000 sources. The data they collect comes from auto finance companies, banks, credit card issuers, and retailers. Credit bureaus also gather information from public records, such as bankruptcies, tax liens, and court judgments, to fill out individual profiles.

But the bureaus don’t capture everything. Except for the new and controversial UltraFico, credit ratings do not consider income or assets. Wealthy people can have terrible credit scores. As an example, someone with no credit cards is viewed as a higher risk than someone who has many, no matter what his or her net worth.

Conclusion

Credit reporting is a $4 billion business in the United States. The credit industry is continuously experimenting and entering new markets. In the current climate of digital innovation, credit scores are likely to become even more entrenched into the fabric of modern existence. Like death and taxes, credit scores have become an unavoidable fact of life.

If you have never seen your credit report, the place to start is to check them on the internet or to order a printed copy by phone. Federal law entitles you to one free copy every year from Equifax, Experian, and Transunion, so even if you have seen your credit report before it is still a good idea to check it every year. To verify your identity, you will need to provide your name, address, social security number, and date of birth. These free credit reports can be ordered online at annualcreditreport.com or by calling 1-877-322-8228.

 

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Republic Wealth Advisors), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Republic Wealth Advisors.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Republic Wealth Advisors is neither a law firm nor a certified public accounting firm and no portion of this blog content should be construed as legal or accounting advice.  If you are a Republic Wealth Advisors client, please remember to contact Republic Wealth Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. A copy of the Republic Wealth Advisors’ current written disclosure statement discussing our advisory services and fees is available upon request.

 

Related Posts