One of the more common myths of credit reports and credit scoring is that your income
plays a key role in determining your credit scores. This is incorrect primarily because
income is not on a credit report. And, credit scoring models are based exclusively
on information from your credit reports. If an item is not on your credit reports then
regardless of how important it might seem, it’s not having any impact on your scores.
Common sense would have you believe that someone who makes a lot of money is a
better credit risk than someone who does not. In fact there is no evidence that supports
this theory. Someone who makes a lot of money has the ability to make a larger
payment but that certainly doesn’t mean that they will make their payments. Income is a
measurement of capacity, not creditworthiness.
If income were used in credit scores to the extent common sense dictates, then doctors,
lawyers and professional athletes would all have very high scores. Conversely,
minimum wage laborers would have the lowest scores.
Don’t misunderstand this to suggest that income does not play a key role in underwriting.
But, it doesn’t play as key of a role as you would imagine. Think about the last credit
card you applied for. Did anyone ask you to provide copies of paystubs? Did anyone
call your employer to confirm your income or employment status? The answer is
undoubtedly “no.”
The primary role of income is to determine your ability to pay back loans. Income is
used to determine the size of your loan, not so much the rates or other terms of your
loans. And frankly, it doesn’t play much of a role in lending except for loans of very large
dollar amounts.
Michael B. Citron is an internationally known public speaker and author. He lectures for professional associations worldwide. Michael is a serial entrepreneur who is dedicated to living the American dream, and helping others to do the same. His role at DisputeSuite.com has placed him in the spotlight of the credit repair industry. DisputeSuite is the largest provider of technology and education services to the industry, and has been a catalyst in the forward movement to standardize the credit repair industry.
P.S. DisputeSuite provides a variety of solutions for your credit repair business. From engaging custom websites, to dispute processing services, to a robust CRM with automations and portals, DisputeSuite is a One-Stop Shop to making your Credit Repair Business A Success! Let’s chat today to discover the best plan for you: 727-877-6812 or support@disputesuite.com
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