Debunking credit card myths: Do my assets affect my credit score?

Jan 15, 2021

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It’s no surprise that travel rewards credit cards get a lot of coverage here at TPG.

By strategically applying for and then utilizing these cards, you’ll unlock the ability to redeem your hard-earned points and miles for things such as first-class flights and luxurious hotel rooms. However, there are a number of misconceptions out there when it comes to credit cards, so today I’ll continue our January series that debunks these myths and allows you to begin planning for your next vacation.

Today, I’ll consider another aspect of your financial profile that seems like it should have an impact on your ability to be approved for a card.

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Your assets and the relationship with your credit score

There’s a popular misconception out there that high net worth equals a high credit score.

On the surface, this makes sense. If you own a home, own a car, have large investment accounts or maintain significant balances in your checking or savings, this should theoretically make you more attractive to credit card issuers. After all, you’re probably less likely to default if you have significant capital to cover your monthly purchases.

Related: How to check your credit score for absolutely free

However, when it comes to computing your actual credit score, your collection of assets (or lack thereof) doesn’t have any impact. Once again, let’s revisit the five main factors that contribute to your FICO score, the one most frequently used to determine creditworthiness:

  • Payment history
  • Amounts owed
  • Length of credit history
  • New credit
  • Types of credit used

As discussed in previous installments of this series, these five factors are weighted based on how important they are to your score.

(Photo by The Points Guy)

As you can see, none of these are explicitly tied to assets such as bank accounts or other personal property. Instead, they all relate to how well you have managed the lines of credit that have been extended to you. Just because you’re a high-net-worth individual doesn’t guarantee that you can keep your credit utilization rate low, pay your bills on time, etc.

Related: What is the difference between a hard and soft pull on your credit report?

Now, that being said, there is one important way that your assets can impact your credit score: when you have installment loans associated with those assets (such as a mortgage or car loan).

These types of accounts give you additional ways to build up your credit history, and they can also vary the types of credit you are using. Believe it or not, owning a house and car free and clear could actually be a negative when it comes to your credit score, as your credit profile may be limited to only credit cards.

In addition, while your assets won’t directly impact your credit score, they do play at least a small role in the credit card application process. Just about all issuers will ask the following questions (in some way) when you apply for a new card:

  • Do you have a checking account, savings account or both?
  • Do you rent or own?

If you answer “both” to the first question, that may signal that you are financially responsible, and owning a home could also help you be viewed in a positive light. However, remember that the issuer has no way to verify the authenticity of these two answers (unless your accounts and mortgage are with the same bank), so they won’t have any formal impact.

For additional recommendations for managing your credit card account(s), be sure to check out my Ten Commandments for Rewards Credit Cards.

Related: These are the best beginner credit cards

Bottom line

Many new readers may think that getting into the points and miles hobby (especially with premium cards such as the Chase Sapphire Reserve) is limited to those with significant assets and high net worth. While this does apply to certain cards, the most important factors on your credit score are those related to how well you’ve managed your credit through the years.

Don’t let a perceived lack of assets prevent you from applying for a new card.

Additional reporting by Chris Dong. 

Featured photo by Westend61 / Getty Images.

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