Many of us believe that if we could become rich then all of our troubles would magically disappear, but this isn’t necessarily the case. The rich have problems too, even when it comes to their credit and credit scores. This might seem a bit ridiculous seeing as how these people might make more in a year than many of us do in a lifetime, however; there are a multitude of factors that can come into play as to why rich people still have credit issues.
But this begs the question, if you’re rich, do you really need good credit anyway? Can’t you just buy whatever you need in cash, leaving all the trouble of maintaining a good credit score, applying for loans, and waiting expectantly to see if you’ve been approved, for those with lesser incomes?
It’s a good question, and one not without some merit. And there are arguments for and against the rich needing good credit, many of which hinge upon a person’s personal financial situation, lifestyle and needs. Let’s start with why a rich person might still need good credit.
The Liquid Issue
There are numerous aspects to the argument as to why the rich still need good credit. First off, the fact that someone is considered rich doesn’t necessarily mean that they are cash rich. The definition of what makes someone rich is often in the eye of the beholder. How and why someone is considered rich might be based upon their income level, their personal property holdings, their worth based upon business ownership or company stock holdings, or an inheritance in the form of a trust fund.
However, things like stock, a business, a trust fund, or property may not be easily convertible into liquid cash, making the need for credit often necessary for making basic purchases. In such situations, credit might also be needed for items such as homes, boats, cars, and other large purchases for which a regular income, even a hefty one, might not provide enough cash to buy outright. But there are other reasons as to why the rich might still need good credit.
The Rich Like to Stay Rich
In the majority of cases, the rich are probably looking to stay rich, and in many instances, they didn’t become rich by making poor financial decisions. This means that the rich may prefer good credit because good credit often means cheaper credit. With a better credit score they might be likely to getter better rates on their credit and have larger credit lines available to them to make the purchases, investments, and take advantage of opportunities that can make them richer and allow them to maintain the lifestyle to which they are accustomed.
Time is Money
To many wealthy individuals, time is money. Not only can having credit and the availability of credit cards at their fingertips make their lives easier and more efficient, it can save them time. Stopping at the ATM machine numerous times to reload on cash, or writing checks for purchases can be time consuming and inefficient. It can also leave a bad impression on business partners or clients. Therefore, having access quick and easy credit for everyday purchases can leave time for more important matters like making more money.
That being said, there are reasons why the rich might not be bothered with the need for good credit.
Cash Savvy
It could be that some of the rich out there just don’t need to be troubled with worrying about good credit. They might have a large enough income or enough liquid cash not to have to worry about their credit scores. And even if they did need credit, having a poor rating that results in higher interest rates may not bother them since they would be rich enough to pay ridiculously high amounts for the credit.
It might also be that they already have the large ticket items they desire and can meet everyday expenses with the cash they have on hand. If they have ample incomes or plenty of money in the bank, and items like homes, boats, cars, etc. are paid off or can be paid for in full, the need for credit just might not be there.
A Moving Target
For some rich people, maintaining good credit could feel like putting a target on their back. With the prevalence of identity theft these days, someone with a good credit score can be a prime target for criminals looking to steal pertinent personal financial information. With this financial information in the wrong hands and a good credit score, it might be even easier for criminals to utilize a rich person’s identity for medical, credit card, bank, mortgage or similar fraud.
David is the co-founder of a leading credit card comparison website in Australia including a range of business credit cards that allow you to earn rewards as you make purchases.
