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FICO scores don’t matter to wealthy people. I know, that sounds like heresy but it’s true. The truly wealthy (or those that will be wealthy someday) know that their credit scores (and credit bureaus) really don’t matter in the long run.

Wealthy People Don’t Worry About Credit Scores

A FICO score or any credit score for that matter are only important if you want to get into debt! What’s the opposite of wealth? Why debt of course. So if you want to be wealthy getting into debt is not going to get you there.

Don’t confuse wealth and high income. Doctors usually have high incomes but are notorious for accumulating low levels of wealth relative to their income. It’s not how much you make, it’s how much you keep!

I heard this advice for the first time on the Bruce Williams (see article links) radio show. I loved listening to that show in high school. It was on at night and it kept me awake while I was working.

Bruce would scold callers for worrying about their credit scores. A caller would complain that they were getting ripped off by a company and Bruce told them not to pay their bill. The caller would freak out about their credit score and Bruce would tell it to them straight, don’t worry about your credit score, money is money, a credit score doesn’t cost you anything.

Who Makes Money from Your Credit Score?

There is a whole industry dedicated to your FICO score. All those “raise your credit score” companies have a vested interest in credit score worship. The credit agencies make money by selling your FICO score to you. I’m sure you’ve heard that you shouldn’t close your unused credit cards because it will hurt your FICO. The credit card companies love that. It may be true to some extant (no one really knows outside of Fair Isaac) but the wealthy don’t care.

It’s easy to understand why we love our FICO so much. Radio and television ads are constantly telling us how important our credit score is. Even financial “experts” tell us to protect our FICO score. While this is good advice for those that want to be in debt, it really doesn’t matter that much for those that are or want to be wealthy.

When Credit Scores Matter

What about buying a house? If you’re buying your first house then yes your FICO matters. However, I’ve found that mistakes on your credit bureau are more likely to affect your FICO than anything else. Credit reports are incredibly inaccurate. This is especially true for family members that share a name, like fathers ands sons (Jr, III, etc) and people with common names like mine.

You’re much better off getting a free credit report and cleaning up any inaccuracies than worrying about whether you should keep 2 or 3 credit cards open.

However, once you’re purchasing your 2nd or 3rd home you should be paying cash or at least have enough of a down payment where FICO score isn’t an issue. Odds are if you have enough cash to buy a house, you’ve made enough good decisions to have a great credit score anyway.

Keep in mind if you are living a “wealthy” lifestyle your FICO will reflect that. I have a paid off house and I use one credit card. I really don’t care what my FICO is at this point but I know it’s pretty good. Why? I have a history of paying bills on time. I pay off my card every month. I don’t have any derogatory credit on my bureau, except for that one month Capital One screwed up my automatic bill pay.

So you see, if you do everything you should be doing anyway, you won’t have to worry. Your FICO will reflect your good habits. My credit card has effectively no limit. I have a credit card issued by a bank where I also have several other accounts. Because of this relationship I qualify for free stock trades, reduced fees and several other perks.

When it comes time to purchase my 2nd house, I’m going to pay cash. So I really don’t care what my credit score is at that point.

FICO counts in areas you wouldn’t normally associate with credit, like car insurance. It seems the FICO is a pretty good indicator of how you live your life so some insurance companies take this into consideration when they price your car insurance.

I have all my insurance through one company. I take advantage of multiline discounts and the fact that we “inherited” a discount from my wife’s father because he was with the same company. My rate now is pretty close to those cut rate outfits that advertise on TV. However, those places don’t tell you that you’re getting a lower rate because you’re getting less coverage.

An employer may also require a credit check to get a job. If you have bad credit and they require good credit then you’re simply out of luck. Again a credit score can be a good indicator of what kind of person you are. Why does an employer want to hire someone that can’t manage their own life?

Conclusion

A final word on credit scores in the previous situations: if you live your life in a way that is conducive to becoming wealthy, you won’t have to worry about your credit score. Pay your bills on time, pay off your debt and save money. It’s that simple.

I’ve hoped I’ve convinced you that the FICO score doesn’t matter in the long run. If you just do what it takes to become wealthy, you’re credit score will reflect that. Stop worrying about your credit score. Instead focus your energies on those activities that will make your wealthy in the long run and your credit will take care of itself.

Article Links

Bruce Williams en.wikipedia.org

Bruce Williams Smart Money Column unitedfeatures.com

Tags    Credit Bureaus    Credit Cards    Credit Scores    FICO    Wealth

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