How Does Salary Impact Credit Scores?

Filed in Credit Score by on March 21, 2014 2 Comments

Salary is not a factor in determining your credit score. The key reason income is not report to the Canadian credit bureau is simply because the money you make doesn’t really affect whether you have good or bad credit scores. The major credit reporting agencies in Canada have included it in credit reports but because the information is personally reported, like on an application form, and not really verified from the CRA (Canada Revenue Agency), it could not be validated and not considered accurate.

This is also true regarding other scores and income related identifiers. This includes things like your net worth, assets, savings, and other investments. This information is not on the credit report and is part of the credit score. Keep in mind though, when you apply for loans such as mortgages, these items have much greater importance.

Here is another thing to consider – is someone with a higher income more creditworthy than someone with a lower income?  The answer, surprisingly, is no.  Income may be a factor in your ability to pay your bills but not how or if you will pay your bills.

You can have a low income, are responsible, don’t spend beyond your means and pay your bills on time. Income is more important when you apply for a mortgage compared to a credit card. A mortgage is a much larger purchase and commitment than a credit card. Therefore, more information is gathered to approve the loan, such as assets and net worth along with your payment history.

There are scores that use income, but these scores use income data from a loan application (think back to when you applied for a credit card, usually it asks for income), which are called application scores. When you apply for a personal loan at the bank, information from the application such as income, length of employment, length at residence is used along with credit report information. These scores reside at the lender and are used by the lender to make decisions. These scores are not available to consumers and are considered custom scores.

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About the Author ()

Pat Drummond is the author of Credit Reports Canada and considered by many to be one of the leading experts on productivity and simplicity in relation to financial planning. He started this online credit score & reporting site to chronicle and share what he’s learned in over 20 years of counseling families and individuals on debt management, obtaining loans and improving credit scores.

Comments (2)

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  1. Faye Plummer says:

    Can you tell me if unpaid traffic tickets outside of my home province can affect my credit rating? I can’t dispute these tickets because of distance and can’t get to the provincial court who holds the file.
    Regards,
    Faye Plummer

    • Pat Drummond says:

      Unpaid traffic tickets should not have any affect on your credit report. What usually happens is first is the province will work with the Ministry of Transportation and revoke/suspend your driver’s licence. You licence will remain suspended until fines are paid. Sometimes the province will proceed with getting a collections agency to recover the fines, in that case, it will affect your credit score. Hope that helps. -Pat

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