Wealthy people may not know of, or worry about their credit scores. Yet stakes can be high, if they ignore managing their credit. Here are the major traps that the wealth can run into when using credit:

1. Credit card limit overuse: Much of your credit score is based on your “debt utilization” ratio; your total balance of credit card debt as a percent of your credit card limit. Anything above 10% sends out internal red flags that you may know nothing about. For example if your credit limit is $100,000 do your best to keep charges on the card below $10,000 at any one time. Because the formula uses the statement balance you can still harm your credit score once that figure has crossed that threshold despite the fact you might pay off the balance monthly. The higher the “debt utilization” the higher risk of damaging your credit.

2. Ignoring your credit score: By checking your credit score you may find clerical errors that may damage your rating. Or your records could be cross-pollinating with someone with a similar name. You may also find that you have experienced identity theft by noticing things that indicate fraudulent use of your personal information.

3. Misunderstanding credit score formulas: Credit score calculations are based on culled information that cannot determine your net fiscal strength. High income and net worth are not factored into your credit standing, nor recorded on your credit reports. Your score is only determined by how carefully you govern your credit and loan accounts. Negligence of the credit score, though unintentional, may actually jeopardize the interpretation of a wealthy client’s misuse of his or her credit, as a high risk when there is a large mortgage, various loans, and/or many credit cards with high balances.

4. Disregarding shopping for the best credit deals: One of the best bargaining tools for cheaper credit and loan rates at your bank is how your credit score is viewed. Before you make major purchases on credit, find out your score to see exactly where you stand. Then negotiate to reduce interest paid on auto loans, home loans, and credit cards. For your credit score visit Equifax at: http://www.equifax.ca