Your salary can potentially impact your credit score, but it’s not necessarily a direct correlation. There are a few key ways that your income can factor into your credit score.
Paying Bills on Time
One of the biggest factors in your credit score is your payment history – whether you pay your bills on time every month. If you have a higher salary, you may find it easier to pay all your bills and debt payments on time each month. Missing payments can severely damage your credit score. So having enough income to comfortably cover your regular payments will help you maintain a strong credit score.
Credit Utilization Ratio
Your credit utilization ratio is how much of your total available credit you are using at any given time. Using more than 30% of your total credit limit can start to negatively impact your score. If you have a higher salary, you may qualify for more credit. This means you have a higher total credit limit and therefore can maintain a lower credit utilization.
Ability to Qualify for Credit
Lenders want to see that you have enough income to manage additional debt. If you have a high salary, you may more easily qualify for loans, credit cards and other credit accounts. Being approved for more credit and having access to more credit will help your credit mix and total accounts, both positive factors for your score. Just be sure not to go overboard applying for too many new accounts at once.
Covering Debt from Income
Part of your credit score considers your debt-to-income ratio, which is how much you owe each month compared to your income. The lower your DTI, the better when it comes to your credit score. If you have a high income but low debt payments, your DTI will be lower.
Lenders may look at your income, debts and DTI when making decisions about extending credit to you. A lower DTI – for example 40% instead of 50% – may improve your chances of approval and could result in better loan terms.
Avoiding Missed Payments
A high salary gives you more breathing room in your budget to avoid missing payments if an unexpected expense comes up. For example, if your car needs a $500 repair, that may be an obstacle for someone living paycheck to paycheck. But with a higher income, you likely have enough savings or flexibility to cover emergency costs and keep up with your normal monthly payments.
Building Savings
Your credit reports don’t show your savings, but having emergency savings and financial stability can still indirectly help your credit. How? If you lose your job or have major unexpected expenses, you can tap your savings to avoid falling behind on bills and credit accounts. This helps protect your payment history and credit scores during challenging times.
Credit Score Differences by Income
Higher incomes tend to correlate with higher credit scores on average, though plenty of high-income earners still have poor credit. According to Experian data, here are average credit scores by income level:
| Annual Income | Average Credit Score |
|---|---|
| Under $25,000 | 667 |
| $25,000 – $34,999 | 679 |
| $35,000 – $44,999 | 685 |
| $45,000 – $54,999 | 691 |
| $55,000 – $64,999 | 700 |
| $65,000 – $74,999 | 706 |
| Over $75,000 | 731 |
As you can see, higher salaries tend to correlate with higher scores, but it’s not an automatic guarantee of good credit. Plenty of high earners still mismanage credit and damage their scores.
Tips to Build Credit on Any Salary
While income can make building good credit easier, it’s certainly possible to build excellent credit even with a modest salary. Here are some tips:
Pay bills on time
Set up automatic payments or calendar reminders so you never miss a payment due date. Payment history is the biggest factor in your scores.
Lower credit utilization
Keep balances low compared to limits, even if that means making multiple payments each month. Shooting for 10% or less utilization helps a lot.
Mix credit types
Having credit cards, retail accounts, installment loans and a mortgage can help demonstrate you can manage diverse credit.
Check for errors
Errors on your credit reports can drag down your scores. Review all three credit reports for free at AnnualCreditReport.com and dispute any inaccuracies.
Limit new accounts
Apply for new credit only when needed to avoid too many hard inquiries on your reports.
Build savings
Even if you start small, having emergency savings prevents you from missing payments if unexpected expenses come up.
The Bottom Line
While income can make it easier to maintain good credit, it doesn’t guarantee a high credit score. Plenty of high earners still misuse credit and damage their scores. The keys are using credit responsibly, never missing payments, and keeping balances low. Anyone who consistently demonstrates these positive credit behaviors can build excellent credit over time, regardless of income.