Income Changes

[moontwpman]

I recently took a job overseas and now I am paid in foreign currency.  My income is also about double what it was in the US.  My credit score was average when I left just over a year ago, and now I'm rapidly paying down debt and cleaning up credit.  My question is...how does my income factor into my credit score.  If I have $10,000 in outstanding debt it is a big difference if I'm making $90,000/year versus $180.000/year.  My employer doesn't report to any credit bureau, so my income is an unknown...does it factor into my score at all?

[RobertEG]

It is not a scoring factor, period.

FICO is thus not, and is not intended to be, a measure of a consumer's total credit-worthiness.

It is an assessment of your potential for timely paying debt obligations over essentially the next two years.

Donald Trump might not be concerned about late pays, so his FICO score might be low.  However, he does not get credit approval based on FICO score.

He gets it based on non-FICO scoring factors, such as net assets and income.

Creditors can, and do, ask for salary info if the are basing their lending determination on more than just a review of credit score.

It is a quick and dirty, low cost way to evaluate credit at lower levels.

However, as the principal amount of credit requested or the requested credit limit gets higher, they are most likely to do a more thorough review based on more than just a three digit risk of payment analysis.

[moontwpman]

Thanks, I realized the same after I submitted the question.  But...since the interest rate they may charge would appear to be primarily based on score, I would contend that income should be a factor in your FICO score.  I don't think they should have it both ways...say that lenders should use FICO AND income/assets to determine creditworthiness, but say we're going to charge you a higher interest rate because your FICO score is low.

[enharu]

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@moontwpman wrote:

Thanks, I realized the same after I submitted the question.  But...since the interest rate they may charge would appear to be primarily based on score, I would contend that income should be a factor in your FICO score.  I don't think they should have it both ways...say that lenders should use FICO AND income/assets to determine creditworthiness, but say we're going to charge you a higher interest rate because your FICO score is low.

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lenders do use BOTH your fico scoring AND income and sometimes assets, depending on the type of loan you're trying to get and the lender you're trying to borrow from.

This is the reason why lenders always ask you about income related questions.

Someone may have millions of asset to his name, but that doesn't represent his credit worthiness and finance management skills. There're millionaires and billionaires who overspend and end up in a ton of financial mess. Certain celebrities for example may come to mind. This is why banks evaluate you based upon BOTH FICO and income. If your income is high but FICO is low, that just means you can easily repay back the loan if you wanted to, but you may not necessarily do what you're supposed to. However if your FICO is high but income is low, that just means you're credi worthy, but a lender shouldnt be giving you out loans or CL that is way more than you make because you obviously cannot afford to pay back.

It works both ways. FICO determines the rate you're going to get. your income determines the appropriate loan amount you should get.

[crunching_numbers]

I understand what you are saying, and in a lot of ways I agree.

A person with $10,000 of debt that makes $1,000 a month is in a worse credit situation that someone who makes $10,000 per month. Your regular monthly expenses that hit your CR and are paid in full will be much higher for someone with more disposable income.

There is also no provision in FICO scoring that excludes debt that is less than 30 days old, or has not truly been due yet. (The NEW charges that you will pay in full right away).