There's a reason why the vast majority of articles about the importance of credit scores are targeted at folks who have either credit challenges or no credit at all. If you're a young person who hasn't had a chance to establish a credit history or if you have experienced some financial setbacks that have harmed your credit, tips on boosting that number quickly are most welcome.
That's because a credit score is a big factor lenders consider when they're deciding whether or not to loan you money to buy a house or a car or even offer you a credit card. For example, Simmons Bank (one of the featured cards on our site) offers one of the lowest rate cards in the country, currently 7.25 percent. But, as you might guess, Simmons only approves applicants with excellent credit.
But do ultra-wealthy folks like Warren Buffett and Bill Gates have to worry about credit scores, too? OK, maybe those guys don't need to fret, but there are still plenty of reasons why the wealthy among us should pay close attention to their credit score, which is determined by a variety of factors, including the timeliness of bill payments and the total amount of money someone owes. Unfortunately, no amount of money can help increase your score as your income does not influence how high your score is. :)
Here are just a few reasons why the well-heeled shouldn't ignore their score:
Getting the Best Rates
People can argue about the traits and qualities required to get rich: Vision, determination, hard work and luck are usually somewhere in the mix. But one that is definitely not common is financial carelessness. Let's face it, acquiring wealth generally entails being smart about earning, saving and spending money.
And that includes getting the best interest rate possible whenever there is a need to borrow money -- and yes, plenty of wealthy people have mortgages (think jumbo mortgages) and even car loans. Part of the equation for lenders who determine the sort of interest rate they'll offer you is a credit score.
If you let your credit score slide, you'll pay a higher interest rate. And nobody, rich or poor, wants to do that.
Another area where a poor credit score will harm the wallets of financially secure people is with insurance premiums. Simply put, just like with mortgages and car loans, bad credit translates into higher rates. "Rates are almost double for consumers with the worst credit compared to the rates offered to consumers with the best credit," says Amber Stubbs, managing editor at CardRatings.com. "If you think you don't need to worry about your credit because you have no need to finance anything, think again! And since wealthy people tend to have greater insurance needs, they can certainly expect some sticker shock if they allow their credit to slip."
Rags-to-riches stories are as American as apple pie. Often, a central piece of that tale includes starting a business. And once someone has achieved a level of financial comfort, it's unlikely that entrepreneurial bug will just disappear.
When that's the case, a good credit score can really matter. For a bank or some other financial institution to lend you money for a business venture, they're going to want to be sure that you are low-risk. And, unless you have established business credit, your lender will likely want to review your personal credit.
A good credit score does just that. "Investment opportunities may present themselves where a wealthy person might not want to put all their own money into the venture," says Dr. Mary Ann Campbell, a certified financial planner and president of MoneyMagic.com. "A good credit score allows loans at a very attractive interest rate (and doesn't tie up your cash flow)."
Getting a Job
Upper middle class and wealthy people usually don't just lounge on a beach day-after-day. High-powered careers and job changes often accompany financial success. More and more these days, the ability to get that next job can include having a solid credit history.
Indeed, according to a study by the Society for Human Resource Management, nearly half of employers conduct a credit background check on potential hires. While it's true that prospective employers have to get permission to examine a job applicant's credit report, would you really want to tell them no? Especially when some employers want to take a look at your credit to make a judgment about how well you can be expected to manage company finances.
Even if you are wealthy and have good credit, it still makes sense to keep a watchful eye on your credit. "It only takes one mistake to significantly hurt your credit," says Amber Stubbs of CardRatings.com. "If you suddenly go (for example) from excellent to good credit, you could feel the impact sooner than you might think."
Where to Get Your Score
The good news is that it's easier and cheaper (yes, rich folks like to save money too!) to get your credit score than it's ever been. Sites like Credit Karma, Credit Sesame, and Wise Piggy are truly free and don't require a credit card. These sites also typically include tips on how to increase your score.
On a related note, if you haven't obtained your credit report in over a year, then you should also visit AnnualCreditReport.com to get free copies of your reports from the three major credit bureaus. Good luck!
Curtis Arnold, a nationally recognized consumer advocate, is the founder of BestPrepaidDebitCards.com, which provides ratings of prepaid cards and secured credit cards. He also founded CardRatings.com almost 20 years ago.