One question that circulates through the personal finance world on a regular basis has come up once again: If I am a millionaire or a billionaire, do I really need to pay attention to my credit report?
The debate rages on — if you can pay in cash for anything imaginable, credit reports shouldn’t be that big of a concern, right? Wrong.
There is a huge difference between a) making seven-plus figures and b) being financially stable or savvy. Income is not indicative of stellar credit.
Just think for a moment of how many high-profile, wealthy individuals have been involved in huge bankruptcy scandals. Income brackets are not enough evidence to establish a reliable history of responsible financing.
Why Credit Is Still Important, Even If You Can Pay Cash
Remember: Having credit does not mean having debt. While credit can rack up some serious red when misused, credit as financial vehicles can actually help dig you out of debt and bolster credit reports.
The purpose of maintaining a healthy credit report and robust credit score is to illustrate your financial responsibility. Credit reports are used by inquiring institutions to create a composite image of who you are financially. This informative portrait is used by lenders, employers and even insurers.
While having enough cash to pay for anything you want seems to be the ultimate trump card, having poor or no credit can be more hassle than it is worth. If a property owner is unwilling to accept full-cash payment, you can always go to another seller who is, starting the property search over. If an employer is unwilling to offer you a job based on your lack of credit, despite proof of substantial assets, you can always find someone else to hire you.
But, is it really worth the time, effort and frustration when maintaining a healthy credit score can be so simple?
There Is No Excuse For Millionaires To Have Poor Credit
In order to make credit work for you, you have to hold and fiercely protect the mentality that you are not taking a loan or keeping a credit card open because it is the only way you could afford a purchase. Credit should not be seen as a way to purchase things beyond your bank account balance. Credit is a method of financing what you can already afford.
With a substantial income, provided there is no underlying debt fiasco, holding credit can be a simple avenue to pay in cash for whatever your heart desires. When you think of credit cards as just an intermediary between your bank account and purchases you want and can afford to pay for in cash, establishing and maintaining a healthy credit report is easy.
The Bottom Line
In today’s society, everyone needs credit history. Regardless of your income level, credit inquirers look at your credit report to gain insight into who you are; your credit report is a snapshot of your financial health. Your income and bank account balance do not prove you know how to handle your money. Bank accounts can be drained in the blink of an eye. Income levels do not show who you were financially years ago — or who you are likely to be in ten, twenty or thirty years from now.
When managed responsibly, credit is the way to financial freedom, providing you with the documentation to back your bottom line. Take the time and effort to check in on your credit; it is the way to secure your financial well-being and prove to others who you are financially.