{"id":8897,"date":"2021-04-22T08:00:00","date_gmt":"2021-04-22T14:00:00","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=8897"},"modified":"2025-08-25T16:29:18","modified_gmt":"2025-08-25T22:29:18","slug":"making-a-six-figure-income-doesnt-mean-you-wont-have-credit-issues","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/credit-101\/making-a-six-figure-income-doesnt-mean-you-wont-have-credit-issues.html","title":{"rendered":"Making a six-figure income doesn\u2019t mean you won\u2019t have credit issues"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law\u2019s editorial disclosure for more information<\/a>.<\/em><\/p>\n\n\n\n

During the 1980\u2019s, when I was growing up, knowing someone who made a six-figure salary was like knowing royalty. It was that number that made you think of owning fancy cars, living in a huge house, and going on lavish vacations. Fast forward to the 21st<\/sup> century and making $100,000 plus does not really seem like all that much money anymore. Still, according to recent Census Bureau data<\/a>, only a little over 20 percent of American households even break into that six-figure number.<\/p>\n\n\n\n

But doesn\u2019t making a six-figure salary pretty much guarantee you will have a good credit rating? Not necessarily. Your salary is not factored into your FICO score<\/a>, but lenders will consider it when approving you for a loan. Loan and\/or credit approval is based on your income and<\/em> your FICO score. But how can someone who makes over $100,000 a year possibly have credit issues? There are some interesting factors which play into why someone who makes a decent income has bad credit. Let\u2019s see what they are and how these factors affect their credit scores.<\/p>\n\n\n\n

Feeling the Pressure to Keep up with the Joneses<\/h2>\n\n\n\n

This is clich\u00e9 but true. Let\u2019s say you have graduated from college and landed your first real job. Gone are your grungy pals from college only to be replaced with well dressed, sophisticated work colleagues and\/or neighbors. They all drive BMW\u2019s and have a garage full of \u201ctoys\u201d and you feel the need to join in the fun. These extravagant purchases require applying for auto loans and\/or credit cards and opening new lines of credit all at once. This could be lowering your FICO score. Why?<\/p>\n\n\n\n

Two categories used by FICO when calculating your credit score is \u201cNew Credit\u201d and \u201cCredit Mix.\u201d In fact, 10% of your FICO score is based opening new credit lines and another 10% is based on the mix of credit you use. According to myfico.com<\/a>, FICO\u2019s official website, \u201cResearch shows that opening several credit accounts in a short period of time represents a greater risk – especially for people who don’t have a long credit history.\u201d Not only does FICO look at how many new accounts you open, but also what types of credit you apply for. So, trying to keep up with your neighbors by applying for a lot of credit in a short period of time may negatively affect your credit score. In addition, each time you apply for a loan or credit card, an inquiry shows up on your credit score. Each inquiry can ding your score up to 5 points apiece.<\/p>\n\n\n\n

Large Student Loans<\/h2>\n\n\n\n

When you were in high school, I am sure you thought a lot about what you wanted to be when you grew up. Achieving that goal probably meant going to college, which in turn meant taking out student loans to pay for college. After graduating from college, you landed a good paying job but your six-figure salary doesn\u2019t go very far when paying a large monthly student loan payment. Add that payment to your rent\/mortgage payment, car payment, food, and utilities and you have the problem of possibly not being able to make your payments on time.<\/p>\n\n\n\n

Why is this important? Making on-time payments makes up the largest portion of your credit score, 35 percent to be exact<\/a>. To quote FICO, \u201cThis is one of the most important factors in a FICO\u00ae<\/sup> Score.\u201d So, even though you are making a six-figure salary, paying one or more of your bills late may cause your credit score to decrease.<\/p>\n\n\n\n

How to Avoid Credit Issues Making a Six-Figure Salary<\/h2>\n\n\n\n

Touching on a few reasons why someone making over $100,000 is capable of having credit issues is great – but how can one avoid damaging their credit rating? Get yourself on a monthly budget plan and you will see the following improvements:<\/p>\n\n\n\n