This story originally appeared on KERA News.
A lot of people daydream about earning more money, assuming that’s the solution to life’s financial problems. It sounds logical: Income goes up, debt comes down.
A new report by CreditCards.com shows that isn’t always the case.
“What we found is that just because you have a higher income, that doesn’t mean that you’re going to have a higher credit score,” senior analyst Matt Schulz says. “Having more money doesn’t necessarily mean that you’re better at paying your bills.“
Above Average Income, Well Below Average Credit
The median income in Texas is just under $53,000 a year, which is actually 2 percent above the national average.
Instead of slightly-above-average credit scores, though, Texans are ranked sixth-worst in the country, with an average credit card balance of about $4,700 and an average credit score of 651.
“So you add it all up and it doesn’t speak well for Texans’ ability to manage their money,” says Schulz.
Overall, the Credit Cards.com report ranks Texas fifth worst in the country for managing money. And Schulz says too many people overthink their credit score.
“As long as you pay your bills on time, keep those balances low, and avoid applying for too much credit in too short of a time, you’ll be just fine,” he says. “And that’s the case whether you make a million dollars a year, or whether you make $25,000 a year.”
No Quick Fix
They key to getting yourself out of a money-management mess is understanding how you got into it in the first place. Schulz says it’s important to know yourself because there’s no “one-size-fits-all solution” for repairing credit.
“Some people will see extra money or an extra credit line as an invitation to spend. Others might be a little more likely to save that money or let that extra credit be there,” he says.
Having a credit card with a lot of available credit helps your score, which is why Schulz says the best advice for credit card owners is the simplest: pay your cards off each month, or at least pay more than the minimum due.
“You can use your credit card and you can make it work for you with rewards and cash back and all that sort of thing, but if you miss payments and you don’t pay off that balance soon enough, the math just doesn’t work for you and those rewards just don’t matter,” Schulz says.
Good advice for Texans struggling to get a handle on credit and money management.