Do Rich People Have Better Credit Than You?

Do Rich People Have Better Credit Than You?

Written by Caitlin Wood
Last Updated December 8, 2021

In an economic age where credit and loans are harder and harder to get, people are becoming increasingly focused on credit scores. Depending on their use or misuse of credit, people eventually find their credit scores increasing or decreasing, and then credit becomes easier or harder for them to get.

This same fact is true for everyone regardless of their income. If you’re wondering if rich people have better credit than you do, the answer is some do and some don’t. The truth of the matter is that everybody needs to worry about their credit scores no matter how much money they have or what their income is.

Wealthy people are not always credit wise, and even very rich people have terrible credit scores. The bottom line is that your overall income and the amount of money in your savings account aren’t even factored in when calculating your credit score.

What Exactly Does Your Credit Score Represent

Your credit score represents how well you manage your finances. Continual overdue payments and unpaid debts result in lower credit scores. On the other hand, prompt payments and a low debt threshold result in higher credit scores. Surprisingly, rich people are not necessarily on top of their monthly payments.

Creditors need to know if you are a good credit risk. They want to know that when they lend you money that they will get it back without a series of late payments, overdue notices, sending it to collections, and ultimately a day in court. They don’t want or need the hassle and expense.

For this reason, creditors turn to your credit score to view your credit history to ascertain whether you have a history of repaying your debts promptly, or whether you have a history of falling seriously behind. If you have a history of being late with payments they aren’t likely to extend credit to you regardless of your income.

Other factors in determining your credit score are the amount of money that you currently owe, and how far back your credit history dates. If you have a really short credit history and you are deeply in debt, it’s clearly a huge red flag.

A Word about Debt Utilization

Another factor that your credit score takes into account is your debt usage or debt utilization. Although this might sound like complex financial jargon, it really isn’t, and every consumer who uses credit should understand it. Your debt usage indicates the amount of your available credit that you use.

So if you constantly have your credit cards maxed out, you have a high debt usage. However, you don’t have to max out your cards to damage your credit score. The average consumer should keep the ratio at around 30%, but a lower ratio would be even better. Keeping that ratio around 10% would have a very positive effect on your credit score. However, if it gets any higher than 50% you could lower your credit score by as much as 100 points.

Sometimes Rich People Really are not That Rich

We’ve all heard people say that someone owes their soul to the bank. In the cases of a lot of people who you think are rich, the old catchphrase might be true. Those who you believe are rich might be drowning in insurmountable debt to fund their extravagant lifestyle.

Some of the people who seem wealthy could be living in a rent-to-own mentality as they get themselves deeper and deeper in debt. Their determination to live in the lap of luxury today will catch up with them eventually. If you’ve been responsible with your debt and money management, chances are your credit score is much higher than theirs.

Thinking of renting in Ontario? Check out the rent-to-own program

Rich People Make Credit Mistakes

Rich people often make huge credit mistakes. The more mistakes they make the worse their credit score becomes. Some of the credit mistakes that rich people make include:

  • Ignoring their Credit Utilization Ratio – Charging a lot to your credit cards could damage your credit even if you pay the balance in full.
  • Not Paying Attention – Rich people sometimes don’t pay enough attention to their credit score. Regardless of your finances, you should check your credit report at least twice a year for accuracy, omissions, and fraud.
  • Thinking Money Talks – Wealthy people mistakenly think that money is a big talker in the world of loans and finance. A high debt load and a history of overdue payments makes you a poor credit risk despite your income.

Why Rich People Still Use Credit in One Form or Another

Even if you’re rich, you’re probably still using credit in one form or another. Rich people use credit to build their wealth by investing it in investments that can produce more income for them. Some have mortgages on their homes or lines of credit at their disposal. Sometimes they choose to make use of credit cards for various reasons. Some of the reasons rich people might choose to use credit cards include:

  • Reward Programs – Credits cards often have great reward programs. A rich person could make purchases and accrue rewards quickly.
  • Security – Carrying large amounts of cash around is a security risk. A credit card protects them from having to carry vast amounts of money, and also protects them from identity theft and fraud.
  • Traveling – Using credit cards while traveling offers them security and prevents the hassle of currency conversion.

Rich people need loans and credit too, and when they do, it’s important for them to have a good credit score. If you have a poor credit score no amount of wealth will help you get a loan or a line of credit.

The Bottom Line

Rich people don’t necessarily have better credit than you, and in a lot of cases they probably don’t. Income and wealth are not determining factors when it comes to your credit score. It all boils down to how well you manage your money and how you handle your debts. Even very rich people have their credit applications declined.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Save With Loans Canada

Special Offers

50 Free Trades Offer

50 Free Trades Offer
Ends August 31st, 2022

Almost $500 in commission-free trades. Code “50TRADESFREE”. Conditions apply.

View Offer
Borrow Today, Don’t Pay Till July

Borrow Today, Don’t Pay Till July
Limited Time

Borrow $500-$50,000 from Fairstone by May 31 and don’t pay until July.

View Offer
Build Credit With Refresh

Build Credit With Refresh

Build credit while spending money with the Refresh Financial VISA card.

View Offer
Build Credit For $7/Month

Build Credit For $7/Month

With KOHO’s prepaid card you can build a better credit score for just $7/month.

View Offer
Industry Spotlight

What's happening with Canada's credit industry?

addy ⎯ Making Real Estate Accessible To All Canadians

addy ⎯ Making Real Estate Accessible To All Canadians

Check out our interview with addy; a platform that allows Canadians to invest in different properties across Canada with as little as $1.

Read Post
Find The Best Rate
In Your Region
Best Personal Loan Provider by Greedy Rates

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.