Tip #41: Live within your means
Many people believe that if they only had more money, they would not have to worry about credit. In fact, this is not true. Many people who have money - or at least have all the trappings of money, including cars and nice homes - in fact have terrible credit.
The secret of this is that it is not your income that decides whether you are a good credit risk or a bad one but rather how you handle money. You could be earning $7 per hour and still paying your bills and meeting your financial responsibilities - in which case you will have terrific credit.
You could also be earning $300 000 a year and be in terrible debt and financial shape due to unpaid bills and excessive debt. The best way to ensure that you have a good credit rating - no matter what your income - is to spend less than you earn. That means living below your means. If you have a very small income, you may need to live with roommates in order to keep costs down. If you have a medium-sized income, that may mean saving more and entertaining less.
You may be interested to note that your income is not a factor in determining your credit score. Although your past and current employers are listed on your credit report - and although lenders may be able to guess your financial status from your loan amounts - your income does not count.
This means that if you won the lottery today or suddenly inherited a large sum, your credit score would not increase. With your credit rating, what matters is how you manage your money, not how much you make.
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