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Can You Make Minimum Wage and Still Have a Maximum Credit Score?

The Labor Department reported last week that Florida lost 127,000 jobs in September, mostly in the food/entertainment and construction industry, after Hurricane Irma flooded much of the state. Texas lost 7,300 jobs, likely a result of Hurricane Harvey. Most of those job losses could prove temporary due to the disruption from the severe storms with the hope that hiring picks up again in the coming months.

Americans’ Wages Are Going up, Will Credit Scores Follow?

Additionally in September, the Labor Department noted that average hourly wages have grown by 2.9% over the past 12 months, the highest annual wage growth in more than eight years.

Those wage numbers may be inflated by the stark amount of jobs lost among lower-income earners. Still, the trend of workers seeing increasing wages should continue as the median U.S. household income increased for the second straight year to $59,039 in 2016 according to the Census Bureau. The increase brought the median income above the prior peak of $58,665 in 1999.

Even with Americans making more money on average, many of us still struggle with personal finance challenges which can turn into credit challenges raising the question of whether higher wages for American workers help their credit scores?

How Does Income Factor into My Credit Score?

Income is not part of a credit report and is not a factor considered by credit scores and has no direct effect on a credit score. Lenders usually pay more attention to your credit history and payment history versus how much money you make when evaluating credit risk. Lenders will use your income as a way to measure a consumer’s ability to repay a loan by comparing income and assessing the borrower’s debt-to-income (DTI) ratio.

However, there can be a correlation between income and credit scores whereby population segments with higher income have, on average, higher credit scores. The national FICO® Score average in July was 700, an all-time high; it’s now at 702. The table below shows that the average score for those who made an estimated $15,000 or less is 652, which is at the high end of the “fair” range (See: What Is a Good Credit Score?) versus 739 for those with an estimated income of $200,000+. Note, these figures represent “averages” – meaning there are many individuals with higher and lower FICO® Scores in each of these estimated income ranges.

Income (est.)* Avg. FICO® Score 8
Under $15,000 652
$15,000 to $24,999 678
$25,000 to $34,999 674
$35,000 to $49,999 681
$50,000 to $74,999 700
$75,000 to $99,999 714
$100,000 to $149,999 721
$150,000 to $199,999 732
$200,000 and over 739
*The Income estimates are based on credit bureau data and may show a correlation to credit scores that is higher than correlation to actual income.

Can Someone Earning Minimum Wage Have an 850 FICO® Score?

The short answer is yes – an individual making minimum wage could have an 850 FICO® Score. As income or wage is not a factor considered in the score calculation, there is no logic in the score that would reduce points for making minimum wage (or award points for having a high income). The actions that drive a high score are focused on how one manages their credit – such as paying bills on time, using available credit responsibly and only applying for credit when needed.

Do States with a Higher Minimum Wage Have Higher Average Credit Scores?

Currently, 2.2 million Americans are living at or below the federal minimum wage, which has been at $7.25 since 2009. Thirty states provide a wage above the federal minimum. Consumers who live in those states with a higher minimum wage have a higher average FICO® Score, 706, versus 696 in states that offer the federal minimum.

Among the top 10 states with the highest average FICO® Score, six offer a wage higher than the federal minimum. When you look at the top 20 ranking, 14 states have a higher wage ranked among the top states. These FICO® Score figures represent “averages” – meaning there are many individuals with higher and lower scores in each of these states.

 Click to view chart…

State Current Minimum Wage Avg. FICO® Score
Minnesota $9.50 730
North Dakota $7.25 724
South Dakota $8.65 724
Vermont $10.00 724
New Hampshire $7.25 721
Massachusetts $11.00 721
Nebraska $9.00 720
Hawaii $9.25 719
Iowa $7.25 718
Washington $11.00 718
Wisconsin $7.25 718
Montana $8.15 716
Oregon $10.25 713
Colorado $9.30 713
Maine $9.00 712
Connecticut $10.10 711
Utah $7.25 711
New Jersey $8.44 710
Pennsylvania $7.25 710
Kansas $7.25 709
New York $11.00 709
Rhode Island $9.60 709
Wyoming $7.25 708
Illinois $8.25 707
Idaho $7.25 707
Virginia $7.25 706
California $10.50 704
Ohio $8.15 702
Michigan $8.90 702
Alaska $9.80 702
Maryland $9.25 700
Missouri $7.70 699
District of Columbia $11.50 697
Delaware $8.25 697
Indiana $7.25 695
Arizona $10.00 692
North Carolina $7.25 691
Florida $8.10 690
Kentucky $7.25 689
Tennessee $7.25 686
West Virginia $8.75 684
Arkansas $8.50 682
New Mexico $7.50 682
Nevada $8.25 681
Oklahoma $7.25 681
Texas $7.25 678
Alabama $7.25 678
South Carolina $7.25 678
Georgia $7.25 677
Louisiana $7.25 675
Mississippi $7.25 666

Drawing a parallel between a higher wage and credit score isn’t conclusive as there are a lot of different factors outside income that affect a credit score. The District of Columbia, which has the highest minimum wage at $11.50 per hour, ranked 34th with an average FICO® Score of 696.

What If I Struggle with Debt?

Remember that paying your bills on time will always contribute significantly towards achieving better credit scores. If you can pay down your debt, it will help improve your credit utilization ratio, another factor that lenders examine. You should only apply for open credit accounts when you need them. This can help positively affect your credit history and reduce hard inquiries. Even if your score is good, the factors will help you identify what you need to focus your efforts on to become even more creditworthy.

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