When you think of the wealthy, you probably think of fabulous mansions, rare and beautiful cars, jetting around the world in private planes, and people who never have to spend a moment worrying about money. You may also imagine that people like this don’t have to ever worry about making their credit card payments or taking out unlimited lines of credit. However, the truth behind wealthy people and their credit history—as well as their problems—might surprise you.
Management vs. Money
It may be hard to imagine, but even the very wealthy can overextend their credit. When it seems like the rich have a great deal of money on paper, this causes them to mismanage their credit, taking out account after account until it becomes overwhelming, and the money they thought they had available is tied up somewhere else. Many a wealthy star has had to declare bankruptcy because they failed to manage their credit.
Income Information Has No Effect on Your Credit
Even the wealthiest people in the world can have miserable credit if they fail to manage it properly and don’t pay their creditors. While this may sound odd, the truth is that credit reports do not collect such information as how much money people make annually or what they are worth; they only report a person’s credit history with information such as how many accounts they have open, whether they have outstanding debt, and whether they avoid paying their accounts late.
The only advantage that the wealthy have over other people is that they may have more credit available open to them because of their ability to repay their debtors. This is a major stumbling block for many people who try and take out a line of credit because their total annual income is simply too low. However, when it comes to struggling with credit, you may have more in common with the rich than you ever thought possible.