Does Your Credit Score Depend On Your Income?

Let us get the basics clear. Race, religion, gender, nationality, marital status and employment history do not impact credit scores. It is because these factors do not help in assessing the credit worthiness of an individual. In several countries, it is not even legal to use these factors to calculate credit scores.

Another frequently debated factor is income. Well, income does not impact your ‘credit score’ but it can impact your ‘credit worthiness.’ While banks will be interested in knowing your income in your loan application form, it will not be included in credit score calculation. In other words, banks will consider your income to appraise your credit worthiness and take informed decision when it comes to approving or rejecting your credit card/loan application.

This is because high income of an individual does not make her less risky. Similarly, low income does not make her more risky. Credit behaviour of an individual is ‘independent’ of her income. Instead, banks use income for calculation of ratios like:
· Debt to income ratio
· Fixed obligation income ratio
· Instalment to income ratio
Credit scores are calculated based on several factors that provide an indication of the past credit behaviour of an individual. Here are some of the factors that will help predict future credit behaviour.


Payment history: It explains your credit behaviour in the past 36-48 months. Your timely repayments or defaults are listed here.
Amount owed: It is the outstanding amount against all your open credit cards and loans.
Length of credit history: It shows how long the credit card or loan account is open or used.
New credit: New credit facilities like credit cards or loans, which you have availed in the recent past.
Nature of credit facility: It is the type of credit facility availed, i.e., secured or unsecured. A balance between secured and unsecured loans will help you build a good credit score.

Enquiries: It is the number of times you have applied for a new credit facility. Too many enquiries negatively impact your score as they portray credit-hungry behaviour.

Income is not an indicator of the past credit behaviour, nor does it help in predicting the future credit behaviour. Hence, it is not a part of your credit score calculation.

Don’t forget it is your credit report and score, not your income report and score.

About the author: Satish Mehta is the founder and director of Credexpert, a credit and debt counselling company in India.