Is there a link between your income and credit score?

We do know that income, net worth, or available assets DO NOT factor into your credit score. In fact, FICO promotes sound information for consumers who want to understand what goes into their score and work to improve it, and they explicitly state that your income will not have any effect on your FICO score.

However, if we flip that question around, we suddenly have a more interesting conversation.

While we know that your income doesn’t determine your score, does your credit score have some sort of bearing on your net worth?

Several studies actually show that there is a correlation between high credit scores and high net worth’s or incomes.

One of those studies was based on data released by the Federal Reserve Bank, no less. They lined up the data on median family income (MFI) compared to median credit scores.


What they found was pretty revealing:

Low income (50% or less of MFI) = 664 median credit score

Moderate Income (50% to 79% of MFI) = 716 median credit score

Middle Income (80% to 119% of MFI) = 753 median credit score

Upper Income (120% of MFI or more) = 775 median credit score

(For reference, the average FICO score in America is now 695 or so and range between 300 and 850.)

The Federal Reserve Bank found that there was an apparent correlation between income and net worth compared to how high a consumer’s credit scores were.

Another study by Albanesi, De Giorgi, and Nosal (2017), found the same – sort of. In this study, they controlled for other variables like age, gender, race, location, and socioeconomic factors, isolating only the two variables of net worth and credit score.

They set out to test the theory that there was “a strong positive relationship between credit scores and income.”

However, their findings were less than 100% compelling.

In fact, they found a much lower correlation between incomes and credit scores than they initially thought. In summary, the published study concluded that “We find that household income is moderately correlated with consumers’ credit scores, and cross-sectional variations in household income account for a modest fraction of variations of credit scores.”

So, it seems that we can reasonably state that if you have a good credit score, you will probably have a higher income and net worth.

What are some of the reasons for that?

The obvious factor is that a higher credit score will save you a whole lot of money throughout your life. Of course, top credit scores save you money on your mortgage, credit cards, student, auto, and other loans, and even insurance, utilities, and rent. Therefore, as a simple function of that savings, high-score consumers should have a larger net worth.

Many employers also check credit now, particularly in white-collar, financial, or government jobs, which leads to the premise that having a good credit score will give you a better chance of landing a higher-paying job, or increased income.

It’s also reasonable to assume that people who pay their bills on time, manage their debt properly, and keep balances low are also good stewards of their finances (resulting in higher incomes and net worth).

While FICO doesn’t factor in your income in the same way that a mortgage underwriter looks at your Debt-to-Income Ratio, for instance, your credit score does weigh heavily on your Credit Utilization, which is the ratio of how much debt you’ve taken out compared to the available credit on each account.

To improve your FICO score, keep balances low, always pay on time, keep older accounts and a good mix of credit, and contact Blue Water Credit if you need a credit score boost of 20, 50, or even 90 points.


Contact Blue Water Credit for a complimentary consultation today!