If there is one thing that we all get a little stressed over, it is our credit scores. Wouldn’t it be nice to be super-rich and to never have to worry about that?
As it turns out, even the ultra-wealthy must answer to the mighty triumvirate that is Equifax, Experian, and Transunion.
Billionaires do indeed have a credit score and if it’s poor, then they are going to suffer financial hits just like the rest of us. This makes them pay even MORE attention to their credit scores because the impacts of a low score can affect them deeply just like everyone else.
Today, we’ll take a closer look at these impacts so that you can see why even the rich are afraid of a low credit score.
Credit Has a Bearing on Insurance Rates
Insurance is a reality that we are all familiar with. Local laws dictate that a certain amount of insurance is legally required and that doesn’t change based on your income level.
A low credit score is going to affect the cost of your insurance and that is where things can get quite nasty for the “financial elite”.
The biggest problem is that billionaires tend to own quite a lot of property. When it comes to making sure that everything is insured, a low credit rating means that their insurance is going to be through the roof.
They are going to feel the difference profoundly because those higher rates are going to add up across the board.
Credit Card Interest Varies Quite a Bit Based on Credit Score
Credit card interest rates are determined by several variables. One of which is going to be your credit score.
It doesn’t matter how much you make or how much you own, if you have a poor credit score then your interest rate is going to be higher. Period.
Billionaires are quite aware of this and they are very aware of the fees involved in not paying on time, so they tend to always pay on time. Larger purchases at a higher interest rate are extremely expensive and because of this most Billionaires are very, very aware of their credit scores at all times.
Loans Rely on Credit
When the wealthy want to start up a new business or make up for lost revenue in an existing business, the odds are that they don’t have the liquid capital on hand to immediately fund it.
A lot of their net worth is going to be tied up in properties, stocks, and other assorted assets that would need to be liquidated to be converted into ready cash.
So, they are going to apply for a loan. When a bank calculates their interest rate, you can bet that their credit score is going to factor.
That score reflects the likelihood of the bank getting paid back, so just like everyone else, a billionaire needs to be mindful of their credit score.
Employment Is Still Important for the Super-Rich
If you’ve ever wondered why those super-rich folks tend to run their companies forever, then, today is your lucky day, we have the answer for you. Employment plays a part in your credit score and billionaires are quite aware of this fact.
When you achieve that level of wealth, there are a lot of opportunities you can cash in on, but some of them will still be out of reach if your credit score is poor.
The Zero Credit Score
We like to think that the rich folks just buy whatever they feel like buying. While this is often true with their kids or lottery winners, the self-made billionaire is usually a different type of creature.
These people often came from nothing and avoided unnecessary debts by living at levels considerably lower than their means.
Usually, this means no impulse buys. If you want a new car, fine, you buy this year’s model next year and you might spend a month letting dealerships bid the lowest price to get your business. A lot of us have a rich relative and we’ve seen it in action. Even though said relative has ludicrous amounts of money, they always come across as… well, kinda cheap!
The “thing” is, that is how they became rich. Take the example of a mere multi-millionaire like David Ramsey.
He never takes out loans and never even uses credit cards and he’s extremely wealthy. Most people who reach this kind of monetary dominance have that old “pull yourself up by your own bootstraps” mentality.
Everyone dreams of just making it big, but the truth is much less shiny. You get rich by living austerely.
Verdict: Billionaires Do Indeed Have Credit Scores (Just Not All Of Them)
Well, there you have it. Credit scores affect all of us, even Billionaires. While many of them made their amazing financial ascensions by avoiding credit cards like a plague, a large number of them use credit all the time, and watch their credit scores like hawks.
The takeaway from this is twofold.
- Take care of your credit score, because nobody escapes bad credit.
- If you have poor credit and you read about a celebrity or entrepreneur that has poor money management skills, it’s nice to know that they are feeling the burn just like everyone else!
Image credit: [KAROLINA GRABOWSKA]