Do Tradelines Still Work in 2020?

February 7, 2020CreditBy toptierfinancial

One question we often hear is “Do tradelines still work in 2020?”

Fortunately, we can say with certainty that tradelines do still work in 2020, and we are confident they will continue to be effective for years to come.

To explain our answer, we will delve into the history of authorized user tradelines and the policies that regulate the tradeline industry.

Why Do Tradelines Work?

Although the term “tradeline” could refer to any account in your credit file, usually in our industry people use the word as shorthand for authorized user tradelines, or accounts on which you are an authorized user.

Credit card companies allow cardholders to add authorized users (AUs) to their accounts, which are people who are authorized to use the account but are not liable for any charges incurred. For example, a business owner could add an employee as an AU of their credit card, or a parent could add their child.

When someone is added as an AU, often the full history of the account is shown in the credit reports of both the primary user and the AU, regardless of when the AU was added to the account. Therefore, the AU may have years of credit history associated with the account reflected in their file as soon as they are added.

This is why obtaining an AU tradeline through a family member or friend is a common way for people to start establishing a credit history. In fact, studies estimate that 20-30% of Americans have at least one AU account.

Why are authorized users able to share the benefits of the primary user’s credit rating, even though they are not liable for the debt? This policy is a result of the Equal Credit Opportunity Act of 1974 (ECOA).

Before ECOA was passed, creditors would often report accounts shared by married couples as being only in the husband’s name. This prevented women from building up a credit history and credit score rating in their own names, which in turn prevented them from being able to obtain credit independent of their husbands.

In response to this unequal treatment, ECOA was passed to prohibit discrimination in lending. The federal law made it illegal for creditors to discriminate on the basis of sex, marital status, race, color, religion, national origin, age, or receipt of public assistance.

This means that creditors may not consider this information when deciding whether or not to grant credit to an applicant or determining the terms of the credit.

ECOA was passed in large part to prevent creditors from discriminating against women and to provide equal credit opportunities to women.

Regulation B is a section of ECOA that specifically requires that creditors report spousal AU accounts to the credit bureaus and consider them when lenders evaluate a consumer’s credit history.

Generally, creditors do not distinguish between AUs that are spouses and those that are not when reporting to the credit bureaus, which effectively requires the credit bureaus to treat all AU accounts in the same way.

As a result of this policy, the practice of “piggybacking credit” emerged as a common and acceptable way for individuals with good credit to help their spouses, children, and loved ones build credit or improve their credit.

The practice of piggybacking is the foundation of the tradeline industry. In a piggybacking arrangement, a consumer pays a fee to “rent” an authorized user position on someone else’s tradeline. The age and payment history of that tradeline then show up on the consumer’s credit report as an authorized user account.

Are Tradelines Legal?

It is understandable that there is some confusion about this since not many people are aware of the idea of tradelines for sale, although the practice has been in use for decades.

While Tradeline Supply Company, LLC cannot provide legal advice, we can refer to several official sources, including the Federal Trade Commission, who have indicated that it is legal to buy and sell tradelines.

While tradelines are not illegal, historically, they have not been accessible to everyone. The high cost of tradelines meant that only the wealthy could afford to purchase tradelines for credit piggybacking. Today, however, innovations in the industry have lowered the cost of tradelines, making them affordable to a much wider audience.

Tradeline Supply Company, LLC is proud to be leading the tradeline industry in automating the process of buying and selling tradelines, offering some of the lowest tradeline prices in the industry, educating consumers on the credit system, and making tradelines accessible to everyone.

Our goal is to provide equal opportunities to those who do not have access to authorized user tradelines through friends and family by providing an online platform that allows for a greater network of connections.

But Didn’t Credit Card Piggybacking Get Banned?

Fair Isaac Corporation (FICO), the creator of the widely used FICO credit score, did try to change its scoring model to eliminate the benefits of authorized user tradelines, although they were ultimately unsuccessful. The firm announced that they were planning to devise a way to allow “real” AUs to keep the benefits of their AU tradelines while at the same time discounting the value of AU tradelines for consumers who FICO deemed to be “gaming the system.”

FICO admitted to Congress that they could not legally discriminate between AUs based on marital status due to ECOA.

While this statement understandably caused a lot of concern among consumers of tradelines, as it turns out, FICO was never able to implement this change in their scoring system.

At a congressional hearing in 2008, Fair Isaac’s president admitted that they could not legally distinguish between spousal AUs and other users, because discriminating based on marital status would unlawfully violate ECOA.

After consulting with Congress and multiple federal agencies, FICO was blocked from discriminating against AU account holders. Consequently, all AU accounts are still being considered in FICO 8, the most widely used credit scoring model.

In addition, studies have shown that accounting for AU data helps make credit scoring models more accurate, so it is actually in FICO’s best interest to continue including all AU accounts in their credit scoring models.

In working with thousands of consumers over the years, our results prove that in 2020, AU tradelines still remain an effective way to add information to an individual’s credit report, regardless of the relationship between the primary user and the authorized user.

Here’s another piece of evidence that proves that authorized user tradelines still work in 2020: many banks actually promote the practice of becoming an authorized user for the specific purpose of boosting one’s credit score. To see this for yourself, all you need to do is go to any major bank’s website and search for “authorized user.” You are almost guaranteed to see several articles pop up that talk about becoming an authorized user in order to build a credit history.

How Do We Know Tradelines Will Continue to Work in the Future?

Most widely used credit scoring models still include authorized user “piggybacking” accounts.

Given that FICO has already targeted the tradeline industry before, it makes sense to wonder whether tradelines will still work in the years to come if FICO eventually does succeed in coming up with a way to discriminate against certain AUs.

Thankfully, we can rest assured in knowing that the tradeline business will be around for a long time. The reason that we can be sure of this is that the credit industry is extremely slow to adapt, so even if FICO were to roll out a new credit score model that can tell which AUs purchased their tradelines, it would take years, if not decades, for this new credit score to be adopted across the entire financial industry. Let us explain why this is the case.

Credit scoring is a complicated process, and all lenders have their own guidelines when it comes to underwriting. FICO has many different scoring models, and the specific versions used to evaluate credit applicants vary widely between different industries and even between individual lenders within the same industry.

Currently, the three major credit bureaus (Equifax, Experian, and TransUnion) use the version called FICO 8, which debuted in 2008. Consequently, this is also the version that most lenders use for measuring consumer risk for various types of credit, such as personal loans, student loans, and retail credit cards.

However, according to FICO, the mortgage industry still relies on the much older FICO score models 2, 4, and 5. Auto lenders sometimes use FICO 8, while many still use FICO 2, 4, and 5. Credit card companies may use versions 2, 3, 4, 5, and 8.

As if this isn’t complicated enough, many lenders also use proprietary credit-scoring guidelines specific to their businesses. As FICO’s website says, “It is up to each lender to determine which credit score they will use and what other financial information they will consider in their credit review process.”

As you can see from the wide range of versions used, lenders are extremely slow to adapt to changes in FICO’s credit scoring model. In addition, their underwriting processes have been built around previous versions of FICO. All of the credit score data they have accumulated over time is only accurate for the particular version that was used to calculate it.

Transitioning to a completely new credit score model would require businesses to expend significant resources on updating their technological systems, collecting and analyzing new consumer data, training employees, and possibly incurring financial losses as a consequence of not being able to rely on the consumer data they collected while using older credit score models.

For these reasons, most lenders tend to be very reluctant to introduce the latest FICO credit scoring model.

Lenders use credit scoring models that are specific to their industries, so they tend to resist changing to newer models. Photo by InvestmentZen.

So, even if FICO were to successfully eliminate authorized user data in future credit scoring models, it is likely that it would take years or even decades for lenders to adapt to this change.

In addition, as the 2008 congressional hearing showed, FICO will face pushback from the federal government if they try to eliminate authorized user benefits again. It is highly unlikely that a large company like FICO would want to risk being shut down by the federal government for violating the law.

Consumers wouldn’t stand for it, either. In the Washington Post, J.W. Elphinstone wrote, “Other consumers besides credit renters stand to lose with the change, namely those for whom authorized user accounts were designed… there’s no way to distinguish these from the latest crop of strangers trying to augment their scores. Lenders who want to find out more information about others on credit card accounts are hindered by the Fair Credit Reporting Act and privacy laws.”

Final Thoughts

When FICO took the issue of piggybacking all the way up to Congress in 2008, they made headlines in their fight against the practice.

This was also during the same time that the subprime mortgage meltdown began which preceded the Great Recession. The entire mortgage industry had to be overhauled and many people assumed that the tradeline industry went down along with it.

What did not make headlines is that FICO’s push to do away with the authorized user tradeline industry actually failed due to the government upholding ECOA and the FTC affirming that the practice of buying and selling tradelines is allowed.

The banks themselves even promote credit card piggybacking among friends, family, and co-workers.

Now, in 2019, this option is more affordable and accessible than ever through companies such as Tradeline Supply Company, LLC, who help provide equal credit opportunity for all by making it possible for nearly anyone to buy tradelines.

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Read more: tradelinesupply.com

Common Mistakes Made When Buying Tradelines

February 5, 2020CreditBy toptierfinancial

Use our list of common mistakes below to make sure you get the most out of your authorized user tradelines. Don’t make the same mistakes we’ve seen before!

1. Having fraud alerts or credit freezes on your account

If you have fraud alerts or credit freezes on your account, new tradelines simply will not post on your credit report.

Fraud alerts essentially freeze your account, so new information cannot be added. If you have fraud alerts on your credit file, you must contact each credit bureau directly to have the fraud alerts removed before you will be able to add new tradelines to your file.

2. Not knowing how tradelines work

The most important factor in purchasing tradelines, in our opinion, is to understand how tradelines work. Without this understanding, it is easy to let commissioned salespeople lead you astray and sell you tradelines that are not the best for your particular situation.

If you are new to tradelines, then be sure to check out our Tradelines 101 infographic for a crash course on the basics as well as the large library of educational articles in our Knowledge Center.

3. Not understanding how credit scores work

Before buying tradelines, it is vital to have a general understanding of how your credit score works. There are tons of useful resources online that can walk you through what factors affect your credit score, such as our guide to building credit with tradelines. Knowledge is power, and understanding how credit scores work is worth the investment since your credit score can affect everything from your finances to your job.

The power of a tradeline does not necessarily depend on its price tag.

4. Judging the power of a tradeline strictly by price

When buying tradelines, putting price first is not wise. It is easy to assume that the more expensive a tradeline is, the more powerful it is, but this is not always the case.

For example, someone with a very established credit profile might look at a $1,000 tradeline and just assume that it is the one they want. However, if that $1,000 tradeline does not significantly improve their current average age of accounts or lower their already low utilization ratios, it may not have very much of an effect, or it could even hurt their credit!

Simply adding more of what you already have is not necessarily an improvement. Our Tradeline Calculator is the perfect tool to calculate where your numbers currently stand and how they may be affected by new tradeline data. Make sure to only select tradelines that will actually help you.

5. Not realizing that the power of a tradeline is always going to be relative to what is in your credit report

The power of tradelines is always going to be relative to what is already in your credit file.

For example, if your average age of accounts is already 10 years old, an 8-year-old tradeline may not necessarily help you very much, since you are not improving that variable.

On the other hand, if someone’s average age of accounts is only 1.2 years old, an 8-year-old tradeline may be more powerful for that person. Tradelines do not affect people in the exact same way because everyone’s credit file is unique.

For more information on choosing the best tradelines for your particular situation and goals, our buyer’s guide to choosing a tradeline is a valuable resource.

6. Relying strictly on buying tradelines

It is not smart to rely only on purchasing authorized user tradelines when building or rebuilding credit. In general, tradelines that you can purchase are usually authorized user positions on credit cards, which are revolving accounts.

While this can be very powerful, almost all credit scoring models will take into account your total mix of credit, and it is more favorable to have a good mix of different kinds of credit accounts.

Some additional examples of different types of credit accounts may include auto loans, mortgage loans, installment loans, etc. Having a good mix of credit types is ideal. For more detailed information on how to optimize your credit mix, check out our article, “Credit Mix: Do You Need to Care About Types of Credit?“

In addition, if your credit report has delinquencies such as collections or late payments, tradelines may not solve your problems. You may need to consider repairing your credit before adding tradelines or in tandem with your tradeline strategy. [Disclosure: This article contains affiliate links.]

The age of a tradeline, also referred to as “seasoning,” is often even more important than its credit limit.

7. Valuing limit more than age

Many people initially focus only on how large of a credit limit a tradeline has. They often think that the tradeline with the largest credit limit is automatically the best tradeline.

For example, they might ask, “Should I get the $30,000 tradeline, or do you think the $20,000 one is enough?” However, this question is flawed from the start.

While there may be some validity to this strategy, we feel that a tradeline’s age is even more important than its credit limit, as we discuss in detail in our Tradeline Buyer’s Guide, “Why Age is the Most Valuable Factor of a Tradeline“, and “The #1 Secret on How to Unlock the Power of Tradelines.”

As a real-life example, it is not uncommon for someone to open a new credit card (possibly with a high limit) and that person’s credit score drops initially. Perhaps the reason the person’s score goes down is a new account has no payment history and may pose a higher risk in the eyes of the credit bureaus until a pattern of on-time payments is established. In this example, a new high-limit primary account actually made their credit score go down initially.

It could be the case that a tradeline with a $1,000 limit is actually the best for them because maybe that one has a lot of age and meets their strict budget. Everyone should consider the age and the limit together when buying tradelines and use the Tradeline Calculator as the first step in assessing your situation.

8. Buying cheap tradelines as a test

Some people will use the strategy of buying a cheap tradeline to see what that does first, and if it works a little, then they will buy a better one next time. We feel this strategy is a mistake.

For one, it ends up costing more in the long run, because now they have to buy two tradelines (one cheap one and one better quality one) when the person would probably be better off just getting one high-quality tradeline to begin with.

Also, buying that cheap tradeline may be working against the goal of improving the average age of accounts because in general, cheap tradelines do not have very much age. So when you add a tradeline with little to no age and then later add a tradeline with age, the first tradeline with little to no age ends up lowering the average age of accounts, thus making it more difficult to improve that average.

Calculating your average age of accounts is crucial when choosing the best tradelines for your credit file.

9. Not doing the math on the average age of accounts

You would be surprised to find how difficult it is to significantly change an average, especially when there are multiple accounts in the equation.

As an experiment, imagine there are 5 accounts that are all 2 years old so the average age of accounts is 2 years old. Now guess how old a new 6th account would have to be in order to make the average age of accounts be 5 years old. (Take some time to guess this answer.)

The answer: 20 years old! Seriously, do this math. 2 + 2 + 2 + 2 + 2 + 20 = 30 divided by 6 accounts = 5 years average age of accounts. The easiest way to do the math for yourself is by using our Tradeline Calculator.

Even most “experts” at other companies do not do this math correctly and often guess wrong, and therefore give bad advice to customers as to which tradelines to buy.

10. Not getting old enough tradelines

If you look at the example above, you will see how easy it is to underestimate how old of a tradeline you may really need in order to significantly improve your average age of accounts. Age is essential. Do not underestimate how difficult it is to significantly change an average. Use the Tradeline Calculator to know for sure.

11. Not buying your tradeline far enough in advance before the reporting date

When you place an order for a tradeline, there is a processing time in order for the tradeline company to receive the funds. For example, with our eCheck payment method, it may take up to 5 business days to receive the funds.

Then, the credit partners have up to two days to add the authorized user. The credit card company may then have their own processing time for updating their records internally. Next, the banks update the credit bureaus, and finally, the credit bureaus publish their records.

For this reason, our “Purchase By Date” is typically around 11 days prior to the beginning of the reporting period. So as long as you purchase the tradeline by the Purchase By Date, we guarantee that your tradeline will post in the next reporting cycle.

12. Urgently needing a tradeline to post, but only buying one tradeline and betting your entire outcome on that one posting

Our posting success rate is the highest in the industry, but even given this fact, credit report data is not always going to be perfect.

In other words, although rare, non-postings do occur, and if you are betting your entire outcome on the results of one tradeline, you may want to consider hedging your bets and buying two tradelines to be safe.

Not to mention that buying two may provide better results anyway. Plus, we offer package deals where you can get 10% off your second tradeline, 20% off your third, and 30% off your fourth.

In short, two is often better than one for many reasons. If it is extremely critical to get a tradeline to post, it is safer to just buy two.

13. Buying tradelines instead of paying down your debt

If you have credit cards with high utilization, it is usually best to pay those debts down before buying tradelines.

Having credit cards with high utilization ratios is a negative factor in your credit report. This negative factor will always play a part in your overall credit picture as long as it exists.

The only real way to solve this problem is to pay down your credit cards. You should do the math using our Tradeline Calculator to see where your money is better spent, but in general, paying down your debt is usually the best advice.

14. Thinking tradelines will fix high utilization

Tradelines should not be thought of as the solution to high utilization on your credit cards. While tradelines can affect your overall utilization ratio, having individual cards with high utilization will still be a factor in your overall credit picture.

In other words, you should not only take into account your overall utilization ratio, but also the individual utilization of each of your credit cards and the number of cards that have high utilization vs. low utilization. Again, the solution to the problem is paying your cards down.

For more details on the variables of credit utilization and how tradelines come into play, check out “What Is the Difference Between Individual and Overall Utilization?”

15. Not factoring in closed accounts when calculating your average age of accounts

Many credit scoring models factor closed accounts into their equation. For example, some people with zero open accounts can still have a good credit score. Clearly, the closed account data is still part of the equation.

Therefore, it is wise to factor in your closed accounts when calculating your average age of accounts.

16. Not getting an extension if you need one

If you end up needing your tradeline to stay active on your credit report for longer than two reporting cycles, you don’t have to buy a whole new tradeline when the time is up. We offer unlimited extensions in 1-cycle increments at half the cost of the original purchase price.

Simply let us know at least 2 weeks before the scheduled removal date if you’d like an extension.

Make sure to use trusted platforms that provide secure online transactions.

17. Buying tradelines from an unethical company

Unfortunately, in this industry, it can be hard to know who to trust. It is essential to do your research and choose a company you trust so you don’t waste your money on low-quality tradelines, tradelines that don’t post, or tradelines that are overpriced.

You also need to be sure to only use reliable platforms that provide secure online transactions. Warning signs that could indicate that a company lacks integrity include fake reviews, unavailable or poor customer service, and websites that are not secure or do not look professional.

18. Asking what the average boost of credit score is

We do not guarantee any boost of your credit score and we also cannot say what the average credit score boost from tradelines is. Tradelines affect everyone differently. One tradeline may help one person while that same tradeline may hurt another, and have no effect on someone else.

All tradelines will be relative to what you already have in your credit file. There is no meaningful average effect of tradelines in general.

Be sure to read “How to Choose a Tradeline” and use our Tradeline Calculator to understand how buying a tradeline could affect your specific situation.

19. Asking for a specific credit score

Although we do not guarantee any boost of your credit score, often when we hear a variation of the following question. The request goes something like this… “I currently have a 520 credit score but I want to be over 700. What tradeline do you recommend to accomplish this?”

Again, we are unable to answer these kinds of questions, but in talking about this topic in general, who says that it is even possible to go from a 520 to over 700 anyway? Not us. (Although we are not saying it is impossible either.) We just do not advise on these types of credit score requests.

But going back to talking in general, if someone has a 520 credit score they probably have some serious derogatory accounts in their credit. If they have such derogatory accounts in their credit file, their credit score will probably not be a 700 regardless of what other tradelines may exist in their credit file. So in this example, the question itself is flawed, since it may be impossible to begin with.

Even in less extreme examples, no one knows the exact credit score algorithms, so no one can say with certainty. Therefore, it is best to not ask that question, because whoever answers that question is making a wild guess and they could easily be wrong and give you bad advice.

Steer clear of CPNs, which could get you caught up in felony identity fraud.

20. Buying tradelines for a CPN

We do not sell tradelines to those trying to use CPNs.

The reason for this is that the Social Security Administration and the Federal Trade Commission have both stated that CPNs are not legitimate and that the use of CPNs to obtain credit is fraud and a federal crime. We highly recommend avoiding any person or business trying to sell you a CPN.

21. Thinking that buying a high-limit tradeline automatically means that you will also get approved for a high-limit credit card

Having a high-limit authorized user tradeline does not automatically guarantee that you will get approved for your own high-limit credit card. Most banks that offer credit cards will typically also consider your income, expenses, credit score, and possibly several other factors relating to your ability to repay debt in order to make a decision on whether or not they are willing to extend credit to you.

22. Mistaking tradelines for credit repair

Buying tradelines is not credit repair. Credit repair seeks to correct inaccurate items on your credit report. If you have inaccurate items on your credit report, you definitely want to get those items removed. [Disclosure: This article contains affiliate links.]

While credit repair is typically associated with removing items from your credit report, buying tradelines adds information to your credit report. Credit repair and tradelines work best together, as you can see in our Credit Repair vs. Tradelines infographic and our article on The Future of Credit Repair and Tradelines.

23. Having extremely bad credit to begin with

If you have bad credit, you may need to fix your credit in order to get the maximum benefit possible from tradelines.

Occasionally we get a call from someone who might tell us that they are currently 90-120 days late on 2-3 accounts and their credit score is in the dumps. Can we help someone with extremely bad credit? The answer is probably no.

Again, we are not able to advise on credit scores (only general information) but in our opinion, if they are currently that far behind on bills and have multiple major derogatories on their credit report, there is no way they can have good credit without correcting the situation.

After all, a credit score is meant to calculate the likelihood of someone defaulting on a credit account, and if they are proving that they are currently in default, then their credit score is going to reflect that. The best advice is to pay those accounts current if they are trying to improve their credit.

24. Buying tradelines from the wrong banks that don’t post well

The truth is that most banks across the country do not post authorized user data very reliably. In other words, with most banks, the odds of a non-posting are very high.

Our company has tried out almost all of the common banks, and due to our high volume of tradeline sales, we have amassed a large amount of data. We know which banks post well and which ones do not. In fact, just about every other tradeline company out there sells tradelines from many more banks than we do.

The reason for this is not because we do not have that inventory available. It is because our integrity level when it comes to the reliability of our postings is so important to us.

The truth is that any company who sells tradelines from more banks than we do automatically has a higher non-posting probability and a lower integrity level. Saying it bluntly, we have the highest posting success rate in this industry because we only work with the best of the best banks that post the most reliably. All other tradeline companies have a lower posting success rate because they work with banks that are less reliable.

In addition, we provide guidelines to follow to get your tradelines to post as often as possible.

If you have a bankruptcy or collection with a bank, tradelines from that bank may not post for you.

25. Having filed bankruptcy with the bank you are ordering a tradeline with

It is possible that some banks will not work with a person if they have filed bankruptcy with that bank. They may be in a sort of “blacklisted” status with that bank.

This can also apply to authorized user positions. Therefore, if you owed a debt to a particular bank when filing for bankruptcy, it is best to choose a tradeline from a different bank as a precaution.

26. Having outstanding collections against the bank you are ordering a tradeline with

Similar to the point made above regarding bankruptcies, having outstanding collections with a certain bank could also pose an issue. The collection status is probably less of a risk of non-posting than the bankruptcy status, but it is still worth mentioning as a potential problem.

27. Thinking that primary tradelines are the best option

Since there are many different credit scoring algorithms, everyone actually has many different credit scores.

Often the main goal of someone shopping for tradelines is to eventually open their own primary accounts. However, we regularly get calls from people asking if we sell primary accounts. The answer is no, we do not.

Being the primary borrower on an account means someone extended credit to that individual and they are financially responsible for that account. In other words, that person is actually issued credit.

We know of some options within the tradeline industry where companies really will issue credit and that accomplishes the “primary tradeline” desire that some consumers have, however, they are usually relatively low limits, and of course, they have no age since it is a brand new account.

So is a primary account with a low limit and no age better than an authorized user tradeline with a high limit and lots of age?

From what we have seen, if we had to choose between these two scenarios above, we believe the authorized user tradeline with age and a higher limit would be the more powerful choice.

28. Not realizing that you have many different credit scores

Each major credit bureau has its own algorithms and reporting methods, and even within each credit bureau, there are many different versions of credit scoring models. Often, the score that is used depends on what kind of company is ordering the report.

For example, not only might your credit score be different at each credit bureau, but the score might also be different depending on whether you are applying for a mortgage, a credit card, a car loan, or trying to rent an apartment.

The credit scoring algorithm used might be one of many different versions of the FICO score, or it could be a VantageScore.

It is possible that each person has over 30 different credit scores. If you google “how many credit scores do I have,” you can read more about this.

The authorized user must use the correct address that is on file with the credit bureaus to ensure the tradeline will post.

29. Not using the correct address that is on file with the credit bureaus

When adding an authorized user to a credit card, it is important that the authorized user provides the correct address that is on file with the credit bureaus. The authorized user’s address is a data point that helps identify the person, and if that does not match up, there can be issues with the tradeline posting.

Check your credit reports to confirm that the address in your file is correct and then make sure to provide this same address when purchasing your tradelines.

30. Having no credit score at all

There are instances where some people do not have any credit score at all. There may be several reasons why this is the case.

For one, maybe the person just never had any credit at all. If this is the case, then getting a tradeline to post should not be a problem.

Another possibility is that the person had derogatory items on their credit report and participated in some sort of aggressive credit sweep or credit repair deletion service that essentially deleted everything from their credit report.

In these types of scenarios, getting a tradeline to post can be a problem. Sometimes there may be blocks on that person’s credit file that prevent the new authorized user account from posting.

31. Not having enough tradelines or having only authorized user tradelines in your credit file

As we mentioned, having a good mix of various credit types is important to building good credit. Therefore, you do not want your entire credit profile to be made up of authorized user tradelines exclusively.

In general, the best credit profiles belong to people who have multiple tradelines from a variety of different types of credit, including credit cards, auto loans, mortgages, installment loans, etc.

If you are not sure how many authorized user tradelines you might need, our article can help: “Buying Tradelines: How Many Tradelines Do I Need?”

32. Not having a tradeline alert set up

A tradeline alert is a notification that a new or updated tradeline has posted to your credit file. To set one up, you will need to sign up for a credit monitoring service.

We ask our customers to make an account with Credit Karma, a free online service that automatically notifies you when new accounts have been added to your TransUnion or Equifax credit report. Credit Karma is also how you will verify whether or not your tradeline has posted.

33. Entering your personal information incorrectly when placing an order

As we alluded to above, there are certain pieces of information that need to match up in order for a tradeline to post to your credit report, such as your name and address. In order for the banks and credit bureaus to verify your identity and link the tradeline to the correct credit profile, the personal information you provide when buying tradelines needs to be 100% accurate, or else there is a chance that your tradelines will not post.

Unfortunately, people often make mistakes when typing in their names and addresses, which can result in their tradelines not posting. Be sure to double-check all of your information for accuracy and correct any typos before placing your order to ensure that your tradelines post to your credit report.

For more tips on how to avoid a non-posting, see our article on how to get tradelines to post.

34. Being unaware of our non-posting policy

Although we are proud to have the best posting rate in the industry, we can’t prevent the occasional non-posting because unfortunately, the banks and the credit bureaus are not always 100% accurate in their reporting processes.

If your Credit Karma credit report has been updated after the last date within the reporting period and your tradelines still haven’t posted, you can follow these instructions to request a refund or exchange for the non-posting tradeline.

When buying tradelines, use some best practices to get your tradelines to post so there is a lower chance of having to deal with a non-posting.

Still feeling unsure about tradelines? Check out our Tradeline FAQs.

What mistakes have you seen when it comes to authorized user tradelines? Are there any common mistakes that you would add to this list?

Read more: tradelinesupply.com

At What Age Can You Start Building Credit?

December 23, 2019CreditBy toptierfinancial

There’s never a bad time to start building good credit, but there is definitely a good time to start: as early as possible. The earlier someone starts building credit, the easier it will be to seek credit as an adult. The question is: at what age can you start building credit?

Whether you want to start building your own credit or whether you want to help your child get a head start on preparing for their financial future, this article is for you. We answer the questions of when you can start building your credit, how to build credit for a minor, and how to build your child’s credit.

Why You Should Start Building Credit Young

Obviously, most children and teenagers don’t have access to credit cards or other credit products, for good reason. However, this doesn’t mean that teens cannot or should not build credit. In fact, quite the opposite is true.

Let’s look at an example to understand why it’s important to start building credit even before turning 18. If you’re an adult and you’ve never used credit before, but you now need an auto loan, what do you think is going to happen when you go and apply for a loan?

Since you don’t have a credit history, chances are, you’re probably going to get denied. If you do somehow get approved for an auto loan with no credit, it’s likely going to have a very high interest rate since you will be perceived as a risky borrower.

The moral of the story is that you can’t wait until you need credit to start thinking about building credit. You need to start building up a positive credit history early on so that you can have that good credit to rely on when you eventually end up needing it.

Beyond the issue of having access to credit when you need it, having good credit may also be important when entering the workforce. Many employers conduct background checks and check the credit reports of prospective hires, and having a solid credit history will reflect positively on applicants.

Having already established good credit will also come in handy when shopping for insurance, applying to rent a home, setting up utilities, and maybe even buying a cell phone plan. All of these industries typically conduct credit checks on applicants before getting into business with them.

How Do You Start Building Credit?

To build credit, of course, you need to use credit products. This is why many people wait until they are well into adulthood to try to start building credit, which, as we just learned above, is a mistake because it can hold you back when you actually need to get credit.

However, we all know how difficult it can be to get approved for credit when you don’t have yet have a credit history that shows creditors that you can manage credit responsibly. Lenders don’t want to take on the risk of lending to someone whose future behavior is hard to predict.

Secured credit cards, which require a security deposit as collateral, can be one way to start building credit.

So how do you start building your credit without a credit history? One option is to apply for a secured credit card, which involves putting down a security deposit as collateral against the credit limit of your card. Lenders can issue these cards to consumers with no credit without taking on as much risk since they can keep the deposit if you default on payments. [Disclosure: This article contains affiliate links.]

Another strategy is to apply for a credit-builder loan, which works in the reverse order of a traditional loan: first, you make all the monthly payments toward the balance of the loan; then, once you have finished making the payments, you receive the loan disbursement.

Since you have already fronted the money, lenders don’t have to face the risk of you not being able to pay back the loan. Because of this, as long as you have enough income to make the monthly payments, your chances of getting approved for a credit-builder loan are very high.

There’s an easier way to start building credit, though. If you can’t get approved for any primary accounts on your own, or if you want a “shortcut” to building credit without having to wait for your primary accounts to age, you can build credit fast by piggybacking on someone else’s credit.

Piggybacking simply means becoming associated with someone else’s credit account for the purpose of building credit. There are three ways to piggyback, which you can also see in our infographic:

Get a cosigner or guarantor who can be held responsible for the debt if you cannot pay it.
Open a joint account with someone who has good credit and can help you get approved for the joint account.
Become an authorized user on someone else’s seasoned tradeline that is in good standing.

The first two of these three piggybacking methods involve opening new primary accounts, which means you have to wait a few years for the accounts to gain seasoning before they start to help your credit in a more significant way.

On the other hand, piggybacking as an authorized user means you can be added to an account that already has plenty of age and on-time payment history. That’s why it’s one of the most convenient ways to start building credit fast.

How to Help Your Child Build Credit

Teach your child about credit before they get a credit card so they don’t make the mistake of getting deep into debt.

Unfortunately, financial literacy is usually not emphasized in schools, so the responsibility of educating children about credit and helping them build credit falls primarily to parents and guardians.

It’s important to not only know how to help build your child’s credit but also to teach them the basics of financial literacy so that they will one day be able to manage their finances and their credit on their own.

Lay a solid foundation by teaching them about budgeting and saving. If your child is old enough to work, that can be a good opportunity to see how they manage their income.

Then you can move on to the world of credit. Your child needs to have an understanding of how credit works before getting a credit card or they could be headed for disaster.

In a survey of college students conducted by U.S. News in August of 2019, about 35% of students surveyed said they were not taught about fundamental financial topics before getting a credit card. A lack of understanding about how credit works and how to use it responsibly can easily lead to getting deep into debt and a lifetime of financial troubles.

In the same survey, 13% of students said they had over $8,000 in credit card debt, and almost 23% said they didn’t even know how much credit card debt they had. No one wants that to happen to their child, so make sure your kid knows how to use credit cards properly before they get one.

But beyond teaching your child the fundamentals of credit, can you build your child’s credit even before they get a credit card or loan of their own?

How to Build Your Child’s Credit Score by Piggybacking Credit

While helping them learn the ins and outs of the credit system, it’s also smart to help them get a head start on actually building credit via credit piggybacking, which means becoming associated with another person’s credit account.

If you have good credit, consider adding your child at an early age as an authorized user to one or more of your credit cards that are in good standing. If they’re not yet ready to use the account responsibly, you don’t necessarily have to give them access to a credit card. Alternatively, if you want to let them use a credit card, some credit card issuers may allow you to set spending limits for authorized users.

Piggybacking credit can help your child build credit early in life.

Being an authorized user on the account will still help them even if they don’t have spending privileges on the card. The positive payment history of that account will usually be reported on the authorized user’s credit profile, which can help kick start their credit score.

Unfortunately, according to the U.S. News study, about 75% of the college students that participated in the survey said they did not become an authorized user on someone else’s account before getting their own credit cards. That means they likely missed out on the lower interest rates and other perks that come with having an established positive credit history.

This statistic is not surprising. As we learned in our article, “What Happened to Equal Credit Opportunity for All?” equal credit opportunity is sadly not a reality in our country. Wealth disparities and historical discrimination prevent many Americans from being able to establish good credit and get ahead in life.

Those with wealth and financial education commonly used the authorized user piggybacking strategy to help their children build credit, while at the same time there are many young people who don’t have parents or loved ones that can help them establish credit. The tradeline industry helps to address this problem by providing access to authorized user tradelines to all consumers.

It’s clear that the authorized user strategy is an ideal way to help your child build credit. But when can you actually start building credit? Is there a minimum age requirement to be an authorized user? Can you start building credit before 18, for example?

At What Age Should You Start Building Credit?

It can be difficult for young adults to get approved for a credit card on their own since credit card issuers are required to check applicants’ income before issuing them credit. However, by using the authorized user credit piggybacking strategy, young people can start building credit earlier than you may think.

Minimum Age for Authorized User on Credit Card

Many credit card issuers have no minimum age requirement for authorized users.

A survey by creditcards.com revealed that half of the major credit card issuers surveyed, including Bank of America, Capital One, and Chase, had no minimum age requirement for authorized users! That means that with many of the most common credit cards, you can add your child as an authorized user at any age.

Credit card companies that do have age requirements, such as American Express, Barclays, Discover, and US Bank, typically impose a minimum age limit that is between 13 to 16 years old.

Check with your credit card issuers to see what the minimum age requirement is for authorized users on your cards.

In addition, check with your credit card issuers to see whether they report authorized user information to the credit bureaus since not all banks do. If you’re purchasing a tradeline, however, you don’t have to worry about that, since all of the banks we work with do report to all three major credit bureaus.

Conclusion

It’s a smart idea to help your child build credit early so they can start their adult life on a financially sound footing. If you have good credit yourself, the easiest and fastest way to build your child’s credit is by adding them as an authorized user to one or more of your credit cards that have a perfect payment history.

Kids can become authorized users at any age with some credit cards, while there is a minimum age requirement of 13 to 16 years with other cards. Check to see what your bank’s policy is.

Unfortunately, many people do not have access to this credit-building strategy. If you are one of those people, consider purchasing a seasoned tradeline when it comes time for your child to start establishing a credit history.

It’s never too early to start building good credit!

Did your parents teach you about credit at a young age? How do you plan to help your child build credit? Share your thoughts below!

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The Surprising History of the Credit Bureaus

December 9, 2019CreditBy toptierfinancial

Most of us have credit reports assembled about us by the credit bureaus, yet few of us know about the surprising history of credit reporting.

The credit bureaus as we know them today grew from small, local organizations that formed as far back as the 1800s. In contrast, modern credit bureaus market themselves as expansive repositories of consumer information that can be used for an ever-growing number of applications.

Unfortunately, the early credit bureaus were known to use unethical tactics to collect information on consumers and sell this information to businesses.

While it may seem that the problems of these early credit bureaus have been addressed by legislation such as the Fair Credit Reporting Act, the credit reporting system still has serious flaws, some of which we highlight in “What Happened to Equal Credit Opportunity for All?”

In this article, we will explore the story of how credit reporting began, including how the credit bureaus originated and evolved into what they are today, and the many scandals that have taken place along the way.

What Is a Credit Report?

A credit report contains information about a consumer’s credit history. This includes a list of current and past credit accounts, along with the age, credit limit, balance, and payment history of each account.

It also contains identifying information such as your name, address, and social security number.

This information helps lenders evaluate the creditworthiness of potential borrowers so they can decide whether to extend credit and what the terms of the loan should be.

For more information on credit reports, see our article “Credit Reports: What You Need to Know.”

What Are Credit Bureaus?

Credit bureaus, also known as credit reporting agencies or CRAs, are the companies that gather credit-related information about consumers and distribute it to lenders—and increasingly, other types of businesses who have an interest in checking people’s credit history.

In the United States today, there are three major credit bureaus: Experian, Equifax, and TransUnion. While there are many other credit bureaus, these three companies dominate the industry.

But it wasn’t always this way. The first credit reporting organizations were a far cry from the modern credit bureaus of today, and the unsavory tactics they used to run their businesses may surprise you.

Early Credit Reporting Agencies

The first recorded group that shared credit information about consumers was the colorfully named “Society of Guardians for the Protection of Trade Against Swindlers and Sharpers,” which was founded in London in 1776. The Society produced reports for its members on the credit history of individual customers, which were often full of gossip in addition to credit information.

The earliest credit reporting “agencies” were groups of merchants who would get together to gossip about customers. Painting by Joseph Highmore, public domain.

Credit bureaus would check local newspapers for news about consumers.

Like the Society, the early credit reporting agencies were small, local organizations that were essentially groups of merchants sharing information about consumers. This allowed them to offer credit to more people and avoid lending to high-risk individuals.

These organizations were industry-specific and did not share information with each other. In 1960, it is estimated that about 1,500 independent local credit bureaus were in operation in the United States.

According to the Philadelphia Federal Reserve Board, these bureaus were “working with local lenders with incomplete and often unverifiable information.”

The bureaus didn’t just collect the information you might expect, such as name and loan information. They also gathered sensitive personal information such as marital status, age, gender, race, religion, employment history, and driving records.

The credit bureaus didn’t stop there. They checked the local newspapers for announcements of promotions, marriages, arrests, and deaths, and attached news clippings to consumers’ credit reports. They would even go so far as to ask someone’s neighbors and colleagues for testimonies about that person’s character.

Even the local “Welcome Wagon” was working undercover for the credit bureaus. This organization would surreptitiously gather information on new residents of an area under the guise of welcoming them to the neighborhood.

The “Welcome Wagon” would secretly collect information on new neighbors for the credit bureaus. Photo by John Fowler on flickr, CC BY 2.0.

The credit bureaus were focused solely on serving the local creditors that belonged to their respective organizations. As such, they typically only reported derogatory information.

Furthermore, there was no standardized way to evaluate a person’s creditworthiness. It was all based on the subjective whims and prejudices of the creditor looking at their credit file.

What’s worse is that the credit bureaus did not allow consumers to view the information that was being reported about them. There was no way for consumers to verify whether the information was correct or where it came from.

Modernization of Credit Reporting

According to the Harvard Business School paper, over the course of the 1960s, many of these small, local credit bureaus started to join together, forming networks that spanned the nation.

In 1971, the Fair Credit Reporting Act (FCRA) was passed to ensure the “accuracy, fairness, and privacy of information in the files of consumer reporting agencies.”

By establishing requirements as to the accuracy and of consumer credit files and access to their information, the FCRA was intended to protect consumers from the unfair practices that were rampant in the credit reporting industry.

The Fair Credit Reporting Act

The FCRA enacted the following rights for consumers:

Consumers must be notified if negative action is taken against them because of the information in their credit file.
Consumers must be able to find out what is in their credit file.
Consumers must be able to dispute inaccurate information and have it corrected or deleted.
Outdated information (generally more than 7-10 years old for negative information) cannot be reported.
Consumers must provide consent for employers to check their credit reports.
Consumers must have the option to request to be excluded from lists for unsolicited credit and insurance offers.
Consumers who appear on a list of prospects requested by a lender must be extended a firm offer of credit.

As a result of the passing of the FCRA, credit bureaus stopped recording events such as marriages and arrests and started focusing more on verifiable credit history information. They also started reporting positive information in addition to negative information.

In 1996, the FCRA was amended to extend additional protections to consumers, including the following:

Consumers have the right to take legal action against anyone who obtains their credit report without a permissible purpose.
Credit bureaus can be held liable for knowingly reporting misinformation.
Credit bureaus must investigate disputes within a certain period of time, usually 30 days.
Banks can share credit information with affiliates, but consumers must be given the opportunity to prohibit this sharing of their information.

The transition to computerized databases allowed some credit bureaus to expand and dominate the industry.

The advent of computer-powered databases allowed some credit reporting agencies to become more efficient and do more business, while smaller agencies that could not afford to make the change got out of the industry.

This consolidation eventually led to the domination of the market by the three major bureaus we know today.

Experian

While Experian did not officially come about until 1996, according to creditrepair.com, the story of Experian can be traced back almost 200 years.

The Manchester Guardian Society was formed in England in 1826 to share information on customers who didn’t pay their debts. This organization eventually became a part of Experian, as did a group of merchants that later formed in Dallas for a similar purpose.

These groups were both acquired by TRW, an engineering and electronics conglomerate that also launched their consumer credit reporting branch as Experian.

Experian was acquired by the British retail company Great Universal Stores Limited (GUS) and became part of their consumer credit reporting arm. In 2006, it demerged from GUS and began trading on the London Stock Exchange.

Although Experian as we know it today did not come along until after the FCRA was passed, the bureau has certainly not been free of controversy.

In 1991, a TRW investigator incorrectly reported that 1,400 people in Vermont had not paid their property taxes, which ruined the credit of those consumers. Several similar cases were discovered throughout New England.

Experian became infamous for their atrocious customer service and was hit with several lawsuits.

Later, Experian settled with the Federal Trade Commission (FTC) for operating a credit reporting scam in which consumers were led to believe they were signing up for a “free credit report” and were not told that they would automatically be enrolled in Experian’s $80 credit monitoring program.

The offending for-profit website, FreeCreditReport.com, is still in operation. As a reminder, the only site authorized to provide free credit reports as required by federal law is annualcreditreport.com.

They settled with the FTC again in 2005 for violating their previous settlement.

In 2015, Experian announced a data breach that existed for over two years and affected as many as 15 million consumers.

The bureau was then fined $3 million in 2017 for deceiving customers about their credit scores, along with TransUnion and Equifax.

TransUnion

TransUnion originally began as the holding company for a rail transportation equipment company in 1968. One year later, they entered the credit reporting industry by acquiring regional credit bureaus. The bureau has expanded steadily since then, although it is the smallest of the three major credit bureaus.

TransUnion has also been guilty of taking advantage of consumers.

Two consumers have sued TransUnion for refusing to remove inaccurate information on their credit reports.

They have also been accused of scamming consumers by not notifying them that they would be charged $18 a month for having a TransUnion account.

In June 2017, the largest FCRA verdict to date forced TransUnion to pay $60 million in damages to consumers who were erroneously included on a government list of terrorists and security threats.

Later in 2017, one of TransUnion’s websites was hijacked and made to redirect consumers to websites that attempted to download malware onto visitor’s computers.

Equifax

Equifax was started as Retail Credit Company by a grocery store owner. Photo by Charles Bernhoeft, public domain.

Equifax was started in 1898 by a grocery store owner who created a list of creditworthy customers and sold the list to other businesses. This business grew and became known as the Retail Credit Company.

The company expanded quickly throughout North America, amassing credit files on millions of Americans by the 1960s.

The Retail Credit Company developed a reputation for collecting extensive personal information on consumers and selling it to just about anyone who wanted it.

Critics accused them of reporting “facts, statistics, inaccuracies and rumors’…about virtually every phase of a person’s life; his marital troubles, jobs, school history, childhood, sex life, and political activities.”

Buyers of these reports would use them to judge the morality of individuals and avoid lending to those who they perceived as morally corrupt.

Consumers were not allowed to see their information, and many had no idea that the company had files on them in the first place.

When the company started planning to computerize their records, which would make consumer information more widely available, the U.S. Congress intervened, holding hearings that led to the Fair Credit Reporting Act being passed.

Equifax had to stop scamming consumers by lying about their identity and their motives when collecting information, among many other changes.

The Retail Credit Company changed its name to Equifax in 1975, which many speculate was a move to improve their damaged reputation after the congressional hearings.

Unfortunately for consumers, Equifax’s issues didn’t end with the Fair Credit Reporting Act. In recent years they have betrayed consumers’ trust even more egregiously.

Equifax ruined their reputation again in 2017, when their systems were breached by hackers twice, impacting hundreds of millions of consumers in the United States, Canada, and Britain.

The scam left the names, social security numbers, birth dates, addresses, driver’s license numbers, and credit cards numbers of consumers exposed for months, from May 2017 until July 2017.

Not only that, but Equifax did not disclose the breach until September of that year, giving top executives plenty of time to sell their shares of the company before going public with the announcement.

They continued to bungle their response to the breach by setting up websites that were supposed to allow consumers to determine whether they were affected by the Equifax breach but instead returned random results.

In addition, Equifax was allowed to charge fees for credit freezes in many states, which gave them the opportunity to actually make money off of this breach.

Nearly two years later, Equifax has still not been penalized or held accountable for this horrific failure in any way. In fact, they just went back to selling credit monitoring, and they are now making more money than ever.

For a fascinating in-depth investigation of the 2017 Equifax breach, listen to the podcast “Breach.”

There is virtually no end to the list of disastrous errors committed by Equifax, but here are some more of the highlights:

The bureau repeatedly tweeted a link to a fake Equifax phishing website, directing consumers to enroll in fraud prevention services at the imposter site.

Equifax left their systems vulnerable to a series of cyberattacks that affected hundreds of millions of people.

Equifax left the private data of approximately 14,000 Argentinian consumers and staff members open to anyone who entered “admin” as the username and password for one of its online portals.
The company removed its mobile apps from app stores in 2017 because they had security flaws that left them vulnerable to cyber attacks.
A website operated by Equifax exposed the salary histories of tens of thousands of people to anyone that had someone’s Social Security number and date of birth, both of which were in the hands of criminals after the security breach.
In October 2017, Equifax’s website was hacked and made to serve malware disguised as a software update, leaving visitors to the site at risk of having their computers infected by the malware.
The company has been sued hundreds of times and fined millions of dollars by the Federal Trade Commission for violating the FCRA.

Sadly, it seems Equifax has not changed for the better since their early days of selling people’s private information to anyone and everyone, since they have allowed criminals to easily access consumer data on a massive scale.

Innovis: The Fourth Credit Bureau

Many people are completely unaware that there is actually a fourth major credit bureau called Innovis. It was founded as Associated Credit Bureaus in 1970 and changed its name to Innovis in 1997. The company is now owned by CBC companies, which purchased Innovis in 1999.

In contrast to the other consumer reporting agencies (CRAs), credit reporting is not the primary function of Innovis. In fact, Innovis does not even offer credit scores.

Innovis instead serves businesses by providing “consumer data solutions” such as identity verification, fraud prevention, receivables management, and credit information. According to finance writer Sarah Cain, Innovis’ credit reports are used primarily to compile lists of pre-approved consumers to sell to lenders for marketing pre-screened offers.

Innovis also states on their website that as a CRA, they “enable” personal solutions such as credit reports, credit disputes, fraud alerts, active duty alerts for consumers in the military, credit blocks, security freezes, and opt-outs.

What Is In Your Innovis Credit Report?

Your Innovis report, like your other credit reports, contains your personal information as well as your credit history. However, they do not receive credit information from all of the same lenders that report to the other three major credit bureaus. If you pull your Innovis credit report, you may notice that some of your credit accounts are missing, particularly revolving accounts.

Your credit report will also show inquiries if any businesses have pulled your file from Innovis.

While you can’t get your Innovis credit report from annualcreditreport.com, you can order a copy directly from the company for free once a year.

Who Uses Innovis Credit Reports?

While there are some anecdotal reports of credit card companies pulling consumers’ Innovis credit reports for lending decisions, it seems that their reports are used mostly for pre-screened marketing offers. Innovis’ services are also used by companies such as cell phone service providers.

Is CBCInnovis the Same Company?

Confusingly, there is another company owned by the same parent company as Innovis called CBCInnovis. Although CBCInnovis and Innovis share similar names, they are different companies with different functions.

Unlike Innovis and the other credit bureaus, CBCInnovis does not maintain a repository of consumer credit data. Rather, it serves as a third-party company that pulls consumers’ credit reports from Experian, Equifax, and TransUnion and compiles the information into one “tri-merge” credit report. These tri-merge reports are sold to lenders such as banks and mortgage companies.

Discrimination in Credit Reporting

Unfortunately, historical discrimination is still baked into the credit system.

You might think that discrimination in the credit system is a thing of the past, left behind with the shady information-gathering tactics of the earliest credit bureaus.

Unfortunately, although discrimination is officially prohibited by the Equal Credit Opportunity Act, inequality is still rampant in the credit industry today.

Past and present discrimination against minorities in the United States affects consumers in ways that have dramatic effects on credit scores. A study by the Federal Reserve Board revealed that on average, blacks and Hispanics have lower credit scores than non-Hispanic whites and Asians, even after controlling for personal demographic characteristics, location, and income.

The credit system further burdens those who are less privileged and provides very few opportunities for disadvantaged consumers to improve their situation.

Conclusion on the History of Credit Reporting

Credit reporting agencies have a surprisingly long and sordid history. From the 1800s to today, the consumer credit reporting industry has been plagued with bias, inaccuracies, and serious security issues.

While technological advancements have allowed the credit bureaus to expand and improve, and government regulation has been enacted to protect the rights of consumers, the system is still far from perfect.

Ultimately, the credit bureaus were built to serve lenders, not consumers, and that remains their primary purpose. We are reminded of this every time consumers are harmed by the incompetent or even outright malicious actions of the credit bureaus.

Have you been affected by a credit reporting scam or a security breach? Let us know in the comments, and please share this article if you liked it!

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Do Federal Laws Really Help Me Establish Credit?

December 4, 2019CreditBy toptierfinancial

In the world of consumer credit, there are a number of Federal laws or “statutes” which help consumers in regards to their personal credit. Two such notable statutes are the Fair Credit Reporting Act, more commonly referred to as the “FCRA”, and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, more commonly referred to as the “CARD Act.”

Both of these laws are consumer protection statutes, meaning they were designed to protect consumers from supposed big bad industry players. But do they really help consumers to better manage or even to establish or re-establish credit? If you dig deeper into the fine print of some of the so-called “protections” you might answer, “no.”

The Fair Credit Reporting Act

The FCRA has been around since the early 1970s, is some 90 pages long and has been amended dozens of times. In the world of consumer credit reporting, the FCRA is essentially the Bible. The FCRA is best known for providing the following protections to consumers, complete with its shortcomings;

Right to free credit reports: Since 2003 every U.S. citizen with credit reports has had the right to see those credit reports at no cost once every 12 months. The website where you can claim those Federal freebies is www.annualcreditreport.com. I’ve often made the point that while “once every 12 months” may have made sense in 2003, it doesn’t make sense in 2019. Given the number of large-scale data breaches and expanding consumer awareness of credit reporting it seems like once every 12 months has become insufficient.

You have the right to dispute inaccurate information on your credit report.

Right to dispute: If you believe something on your credit reports is incorrect, you have the right to dispute that information, for free. When you dispute the information the credit reporting agencies and the companies that furnished the information must perform a reasonable investigation. Many years ago I was critical of this process, but my stance has evolved.

The dispute process has become much more consumer-friendly and is normally completed within a couple of weeks rather than the allowed-for 30 days. Consumers can now add supporting documents/attachments to their dispute communications and the credit reporting agencies can and do override responses from their data furnishers, disproving the assertion that the credit bureaus simply “parrot” what’s reported to them.

There are many other protections afforded to consumers by the FCRA, but some argue it falls short of helping consumers to establish or rebuild their credit. The reason is that the entire credit reporting system is voluntary.

Voluntary System

The FCRA does not require any lender or service provider to report information to the credit bureaus. That’s why you generally don’t see things like rent or utilities on consumer credit reports. And, even in the lending environment, there’s no requirement that any lender must report your account or accounts to any or all of the credit bureaus. And while I’m not criticizing the Act’s silence on this issue, unknowing consumers may think they’re building credit by paying rent and utilities when they really aren’t.

Even in the world of authorized user tradelines, a common and effective method of building or rebuilding credit reports and credit scores, there are some card issuers that do not report to the credit reporting agencies. There’s no obligation in the FCRA for issuers to do so. As such, it’s important that if you’re being added as an authorized user to someone’s credit card that you do so with an issuer that does, in fact, report to the credit reporting agencies.

The Card Act

Let’s get something on the record…I really don’t like the CARD Act. The Card Act is the statute that makes it illegal for credit card issuers to grant credit to a consumer who is under 21 unless they have a job or a co-signer. The same consumer can get themselves into five or six figures of student loan debt, but they can’t open a credit card.

Additionally, many large credit card issuers don’t allow co-signers any longer. As such, the “co-signer” exclusion to the under-21 restriction of the CARD Act isn’t even an exclusion any longer, unless you want to limit your credit card options. Further, the under-21 rule also seems to suggest when someone turns 21 their financial or employment situation will immediately change, which isn’t a guarantee and certainly not tied to an age.

Those who are under 21 can still begin to build credit using the authorized user strategy.

The under-21 restriction also puts everyone who doesn’t have a job or a co-signer three years behind the curve as to building their credit reports. Before the CARD Act, someone as young as 18 could have opened credit accounts in their name, no problem. This eventually served them well as they would start building credit at an earlier age.

Authorized Users Are Still A Good Option

The one way around all of this statute silliness is the authorized user strategy. There is no restriction to being added as an authorized user to a credit card, regardless of your age. As such, people who are under 21 can still begin to build credit, improve their credit scores, and enjoy the benefits of using plastic.

John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group and the author of four books about consumer credit. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has 27+ years of experience in the consumer credit industry, has served as a credit expert witness in more than 370 lawsuits, and has been qualified to testify in both Federal and State courts on the topic of consumer credit. John serves as a guest lecturer at The University of Georgia and Emory University’s School of Law.

Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.

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What Is Bad Credit and How Can It Affect You?

November 29, 2019CreditBy toptierfinancial

Bad credit is something we all fear, but what is actually considered poor credit and how could it affect you? In addition to explaining what bad credit is and why you need to avoid it, we’ll also provide some strategies in this article to help you fix bad credit.

What Is a Bad Credit Score?

The definition of “bad credit” varies depending on which credit scoring system you are talking about. Since FICO 8 is the scoring model most widely used by lenders, we will focus on FICO when discussing the question of what is considered bad credit.

The FICO 8 credit scoring system assigns consumers a number to represent their creditworthiness, with the lowest credit score possible being 300 and the high end of the scale being 850.

A high credit score shows lenders that they can be fairly confident that a consumer will repay debts because they have demonstrated responsible behavior when it comes to credit in the past.

A low credit score, on the other hand, means that someone represents a higher risk to lenders because they are thought to have a higher probability of defaulting on a loan.

According to Credit Karma, a FICO score between 300 to 579 is considered a poor credit score, while a fair credit score is between 580 and 669. In contrast, an excellent credit score is between 800 and 850.

Credit scores between 300 and 579 are considered poor credit.

What Gives You Bad Credit?

As we mentioned, a bad credit score means lenders perceive you as a high-risk borrower. Therefore, what causes bad credit is poor management of credit and risky behaviors that indicate you may have a higher probability of default.

For example, being late on payments or missing payments altogether can really hurt your credit because payment history is the most important factor of a credit score.

High credit card utilization can lead to bad credit. Photo by Natloans

What causes bad credit specifically? Here are some more examples:

Late or missed payments
Defaulting on a loan
Charge-offs
Collection accounts
Judgments
Settlements
Bankruptcy
Foreclosures or repossessions
Maxed out or high-utilization credit cards
Too many inquiries at one time
Too much new credit

Sometimes people have bad credit because of things they can’t control, like having a medical emergency that leads to huge hospital bills that they can’t afford to pay. In fact, the majority of consumer debt in collections is medical debt, according to Magnify Money.

Bad Credit Loans

If you have bad credit, you’re likely going to have a hard time getting loans with favorable terms or possibly even getting approved for a loan in the first place. Since a bad credit score represents a high risk for the lender, loans for people with poor credit typically have higher interest rates and may require collateral or a down payment—if the lender is willing to approve the loan at all.

Personal Loans for Bad Credit

Payday loans can come with interest rates of up to 400%. Photo by Aliman Senai.

Personal loans for bad credit are few and far between. Usually, at least fair credit is needed to be considered for a loan. Bad credit loan lenders may charge very high interest rates since they are taking on a lot of risk by lending money to someone with poor credit. These higher interest rates may translate into thousands of dollars of additional interest payments over the term of a loan.

Very bad credit loans such as payday loans often have astronomical interest rates of up to 400%, which makes it nearly impossible for many consumers to get out of debt.

Bad Credit Car Loans

Bad credit auto loans, also known as subprime auto loans, are often considered “second-chance” loans because they are typically the next option for those who have been rejected for traditional auto loans. Although there is not necessarily an official dividing line between which credit scores are considered prime and subprime when it comes to auto loans, credit scores below 620 tend to be considered subprime.

Car loans for bad credit, similar to personal loans for bad credit, are associated with much higher costs than prime auto loans. Since lenders of second-chance auto loans are taking on additional risk, these loans often have significantly higher interest rates and more fees than auto loans for consumers with good credit. Additionally, car loans for bad credit may come with penalties for paying off the loan early.

Bad credit car loans can have triple or more the interest rate as prime auto loans. Photo by QuoteInspector.com.

According to Investopedia, “While there is no official subprime auto loan rate, it is generally at least triple the prime loan rate, and can even be five times higher.”

Credit Cards for Bad Credit

If you have bad credit, your options for getting a credit card will be limited, and you will most likely not be able to get the perks associated with premium credit cards, such as low interest rates, high credit limits, and rewards. Credit cards for poor credit may also come with annual or even monthly fees.

Subprime credit cards often require you to make a deposit with the lender as collateral. These cards are known as secured credit cards since they are secured by your deposit, which the lender can keep if you fail to make payments on the card. Sometimes, the lender may be willing to switch you to an unsecured card after you have shown a history of consistent on-time payments.

As we’ve seen with loans for bad credit, credit cards for bad credit, both secured and unsecured, will likely have high interest rates, sometimes as high as 30% or more.

How to Fix Bad Credit

Having a bad credit score is expensive. It makes getting any kind of credit more difficult and more costly because bad credit lenders tack on high interest rates and fees to compensate for the higher financial risk of poor credit loans.

Bad credit doesn’t just dramatically increase the cost of credit. It can also affect other aspects of your life, such as your insurance premiums, your ability to find housing, and even your job, since many employers now check prospective employees’ credit reports. Therefore, most people with bad credit want to fix it as soon as possible.

Here are some strategies that you can try if you need to fix bad credit.

Credit Repair

If you have bad credit as a result of identity theft or extensive errors on your credit report, you’ll likely need to undergo credit repair in order to clean up your credit file.

Some people opt to try their hand at DIY credit repair, while others may prefer to hire a trusted credit repair company to get help with the dispute process and potentially faster results. [Disclosure: This article contains affiliate links.]

Either way, it’s important to be aware of best practices when disputing credit report errors. It’s best to submit your dispute by sending a letter along with documentation to verify your identity and support your claim. Trying to dispute errors online or over the phone may not yield the best results.

In addition to disputing inaccurate information with the credit bureaus, it’s also important to contact the company that is furnishing the data so that the error doesn’t get reported again in the future.

Rebuilding Credit

Improving bad credit takes time and patience. While credit repair companies may claim to have tactics that can boost your credit fast, the reality is that these tactics are usually limited to removing inaccurate information from your credit report. If you remove everything from your credit report, what are you left with?

The best way to fix bad credit, beyond correcting inaccuracies, is to rebuild it with more positive credit history over time. In other words, you need to add more positive accounts to your credit profile and keep them in good standing while they age. At certain age levels, these accounts should begin to boost your credit profile with that positive payment history.

Rebuilding credit with positive credit history helps to fix bad credit.

One option that can help people re-establish credit is opening a credit-builder loan, which works in the reverse order of a traditional loan. Instead of receiving the loan amount up front and then making payments to the bank to pay off your debt, with a credit-builder loan, you make all the payments first and then receive the funds after you have finished paying off the loan. Since these loans are much less risky for lenders, they can be offered to those struggling with bad credit or lack of credit history.

Generally, though, building credit by opening new accounts can take at least two years to see much of a positive effect. The best way we have seen to bypass this two-year waiting period is by piggybacking on the good credit of others.

Have you been affected by bad credit? What did you do about it? Tell us your story in the comments.

Read more: tradelinesupply.com

#AskanExpert: Should I Apply for an Apartment or a Credit Card First?

October 31, 2019CreditBy toptierfinancial

Q. I am planning to apply for a new apartment soon and my credit score is 678 from Equifax and 608 from Transunion. What do most rental companies require to get approved? This is a low-income property.

I also want to get a new credit card for someone with low income and no annual fee. Are there any credit cards that will give me a card with my current credit scores? Also, should I wait to get a credit card after the apartment complex does their credit check or should I get a credit card first?

Dear Reader,

Each rental company will look at your credit report differently. Ultimately, they want to know if they can trust you to pay them on time every month. Because your credit score is considered fair, you may end up needing to have a bigger deposit to secure an apartment.

Having only fair credit can make it difficult to get a credit card with a decent interest rate. However, you can look for a secure credit card. These cards work like regular cards, but they are secured by a deposit you make. Secured cards provide a great way for people with no credit or with a low score the opportunity to improve their scores and their credibility.

Be sure to do your homework and compare several secured credit cards. Look for one that meets your needs–in this case, one that does not have an annual fee. Another option for improving your credit would be to check out Experian Boost. It uses your phone and utility bill payments to “boost” your score if you have been paying those regularly and on-time.

Now, whether you should wait to get your card after the apartment company reviews your credit, I think you should. Whenever you ask for new credit, even for a secured credit card, a hard inquiry is generated on your report, and it lowers your credit score. So, it’s best to have the highest possible score to get your apartment.

After that, apply for the card and use it strategically, always paying on time and only using up to 30% of your available credit or less. If you need additional guidance, feel free to contact an NFCC-certified credit counselor from a local nonprofit near you. They are ready to help and can provide more personalized recommendations for improving your credit. Good luck!

Sincerely,

Bruce McClary, Vice President of Communications

Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.

The post #AskanExpert: Should I Apply for an Apartment or a Credit Card First? appeared first on NFCC.

Are Inquiries Really Killing Your Credit? What You Need to Know

October 29, 2019CreditBy toptierfinancial

People often point the finger at inquiries as the cause of their bad credit, but is this blame justified? Can inquiries really kill your credit score? Keep reading to find out.

Credit Inquiries Definition

A credit inquiry, also commonly referred to as a credit check or a credit pull, is a request by a business to check your credit report.

There are two different types of credit inquiries: a hard inquiry (or “hard pull”) and a soft inquiry (or “soft pull”).

The type of inquiry depends on the reason for the credit pull and the business conducting it.

A hard inquiry occurs when a business who is considering issuing you credit gets your credit report from one of the bureaus.

What Is a Hard Inquiry?

A hard inquiry is when a creditor who is considering issuing you credit pulls your credit report from one of the credit bureaus.

Hard inquiries typically occur when you are applying for loans, including mortgages or auto loans, as well as credit cards.

When you are “rate shopping” to look for the best interest rates on an installment loan, such as a mortgage, auto loan, or student loan, FICO doesn’t penalize your score for this. As long as the credit inquiries are within 45 days of each other, they will all be counted as just a single inquiry.

How Many Points Does a Hard Inquiry Affect a Credit Score?

Since a hard credit inquiry on your credit report means you are actively seeking to get new credit, this is seen as risky behavior by lenders. According to FICO, people with six or more inquiries on their credit files are eight times more likely to declare bankruptcy than people who do not have any inquiries on their credit reports.

For this reason, each inquiry may lower your credit score by up to five points.

The specific number of points an inquiry costs you depends on other factors in your individual credit profile, such as the length of time since your last inquiry. If you do not have any other inquiries on your credit report, a hard pull likely won’t affect your score very much.

Depending on what else is in your credit profile, it may not even lower your score at all.

When Do Hard Inquiries Fall Off a Credit Report?

Hard inquiries are automatically removed from your credit report after two years.

How Long Do Hard Inquiries Affect a Credit Score?

While hard credit inquiries fall off your credit report in two years, they only impact your credit score for the first year.

What Is a Soft Inquiry (Soft Credit Check)?

A landlord may do a soft credit check when evaluating your rental application.

A soft inquiry, also known as a soft pull or soft credit check, can happen for a variety of different reasons. Unlike hard inquiries, which are conducted by businesses considering offering you new credit for the first time, soft pulls are used by entities that are interested in your credit report for other purposes.

This could include potential employers or landlords pulling your credit as part of a background check, for example.

When you check your own credit report, this is also considered a soft inquiry.

Soft credit checks may also be used by businesses you already have accounts with who routinely check to make sure you are still a creditworthy consumer.

How Do Credit Inquiries Affect Your Credit Score?

Soft inquiries do not affect your credit score. Soft pulls are typically not used when you are actively seeking new credit, so they do not necessarily indicate risky financial behavior. Therefore, they are not factored into your credit score.

Since checking your own credit report is classified as a soft credit check, you do not need to worry that checking your own credit report will affect your score. It is a myth that checking your credit will make your score go down. You can actually check your own credit report as many times as you like without it affecting your score.

New credit makes up 10% of a FICO score.

In fact, you can even get a free soft credit check of your own report using free sites like creditkarma.com.

When it comes to hard pulls, although people tend to fixate on the impact of these hard credit inquiries, the truth is that they are a relatively minor player in your credit score.

Of the factors that go into your credit score, the category that includes inquiries, “new credit,” is the smallest one, making up about 10% of your score.

Within that small category of new credit, according to FICO, there are several different data points that are taken into consideration. These data points include:

The number of new accounts
The proportion of new accounts vs. seasoned accounts for each type of account
The number of recent credit inquiries
The amount of time that has passed since recent account opening(s) for each type of account
The amount of time that has passed since recent credit inquiries

As you can see, there are several variables in this category that can affect your credit score beyond the number of inquiries on your credit report.

Since inquiries are just one variable within one small piece of the credit score pie, they do not weigh heavily on one’s credit score. Therefore, as we mentioned above, each hard inquiry should only cost you a maximum of five points, and if they are done in a short period of time they often are only counted as one inquiry.

Inquiries typically only cause problems if you show new hard inquiries continuously over a long span of time, which makes you seem more risky to potential lenders.

One possible reason for this conclusion is if you continuously have your credit ran over an extended period of time, the lenders assume that you are being denied credit. As mentioned above, this is not the case as long as the inquiries are done in a short period of time. That is assumed to be the “shopping” period.

In the case of someone having continuous hard pulls over an extended period of time, a few points lost per inquiry can add up if there are a lot of them. If you have 10 inquiries on your credit report over an extended period of time and the average decrease in score per inquiry is 3 points, that’s a total loss of 30 points! If you are near the lower edge of the “good credit” range, this 30-point dip could take you into a lower credit score level.

This would be an example of a more extreme situation, but if this person were in the “bad credit” category after the hit from these inquiries, the inquiries may have tipped the scale on the credit score category, but they are not the original cause of being on the cusp of bad credit to begin with.

Some people believe that you cannot get a mortgage if you have recent inquiries on your credit report. However, inquiries themselves are typically not an automatic disqualifier, although you may have to give a few sentences explaining each inquiry. If you have enough inquiries on your credit report to lower your score, though, this could affect the terms of your loan.

Can You Remove Inquiries From Your Credit Report?

People with a lot of inquiries on their credit reports often want to know how to remove inquiries from a credit report fast. However, as with any credit repair process, there is no silver bullet that will instantly boost your credit score. It takes time, work, and patience if you want to see your credit score go up.

It’s also important to note that there is no legitimate way to remove timely and accurate inquiries from your credit report. If you really did get a hard inquiry, it would be fraudulent to lie and claim that the inquiry should be removed.

According to the Federal Trade Commission, “No one can legally remove accurate and timely negative information from a credit report.”

The same rules apply when you are working with a credit repair company. The FTC says, “The first rule of credit repair is that no credit repair company can remove accurate and timely negative information from someone’s credit report.”

If you have inaccurate inquiries shown on your credit report as a result of identity theft or a reporting error, however, you can and should look into how to delete hard inquiries so you can get the credit inquiries removed.

How to Remove Inquiries From a Credit Report

Hard inquiry removal may seem intimidating, but removing credit inquiries from your credit report is certainly possible if they are inaccurate or fraudulent.

If you are interested in how to delete credit inquiries, the best way to go about it is by writing a credit inquiry removal letter. Write a letter to the credit bureau(s) that explains the errors and proving that you did not authorize the hard pull on your credit report. Also, attach a copy of your credit report indicating which inquiries are inaccurate. The FTC provides a sample letter that you can use as a template.

Once the bureau(s) receives your credit inquiries letter, they have 30 days to investigate the dispute and respond. If the creditor cannot prove that you authorized the hard pulls on your account, the bureau will delete the inquiries from your credit report, and the credit inquiry removal process will be complete.

Conclusion on Credit Inquiries

We often hear people blaming their bad credit on the fact that they have too many inquiries on their credit. However, we do not believe that inquiries are really the cause of bad credit.

We believe the cause of bad credit usually comes down to missed payments, defaults on loans, and/or high credit utilization. These factors are much more significant than simply too many inquiries.

We are aware that on many credit monitoring platforms, the system may mention that the person has too many inquiries. Perhaps this is one cause of the myth that inquiries are the cause of bad credit.

However, as illustrated in this article, inquiries are only one data point among several other data points within the category known as “new credit,” which accounts for around 10% of someone’s overall credit score. This does not mean that inquiries alone count for 10% of your credit score. It means that inquiries are one of several data points that combined account for around 10% of a credit score, so it should be fair to assume that inquires, in fact, count for less than 10% of a credit score.

It may be possible for inquiries to have a significant effect on one’s credit score in extreme cases such as someone having multiple hard inquiries pulled continuously over the course of a year. However, in more typical scenarios, inquiries most likely are not the cause of someone having bad credit.

Read more: tradelinesupply.com

Credit Reports: What You Need to Know

October 11, 2019CreditBy toptierfinancial

Nearly half of Americans believe a credit score and a credit report are the same thing, according to a study by the American Bankers Association. That’s a big problem because it means many of us are seriously misinformed about how the credit system works.

Since credit is such an integral part of our financial ecosystem, it affects nearly all of us at some point in our lives. Your credit health can determine not only your access to credit and the cost of using credit but also employment opportunities, housing options, and more. Not understanding how credit works, therefore, can have serious consequences.

We want to help address this problem by making it easy to understand what your credit report is and why it’s important, the difference between your credit report and credit score, how to get a free credit report, and how to dispute errors on your credit report.

What Is a Credit Report and Why Is It Important?

A credit report is a detailed report on your credit history prepared by a credit reporting agency, also known as a credit bureau. The three main credit bureaus are Experian, Equifax, and TransUnion, and we’ll discuss each below. What is in your credit report can be different for each bureau, since they are private companies that do not share information.

What Is in a Credit Report?

Credit reports contain identifying information such as your name, social security number, and current and previous addresses. They also contain a detailed summary of your credit history, which includes items such as the following:

Credit reports include a list of your credit accounts and financial records.

A list of current and past tradelines (credit accounts), along with the date opened, credit limit, balance, and payment history of each account
Inquiries into your credit history
Public records of bankruptcies, foreclosures, tax liens, etc.
Accounts in collections

How Far Back Do Credit Reports Go?

The information in your credit report usually goes back about 7-10 years.
Current accounts should show up on your credit report as long as they are open.
Negative information, such as collections, will fall off your credit report seven years after the delinquency occurred.
Closed accounts that were closed in good standing fall of your credit report in 10-11 years.

What Is the Difference Between a Credit Report and a Credit Score?

Credit Report
Credit Score

Prepared by the three major credit bureaus
Many different credit scores

A list of all your credit accounts and related personal information
A three-digit number between 300 and 850 meant to represent your creditworthiness

Information in your credit report is used to calculate your credit score
Reflects the information in your credit report

You are legally entitled to get a free credit report from each bureau once a year
You are not legally entitled to check your credit score for free (although some credit card companies may offer this to customers)

Does not include your credit score
Does not include information on your credit history

Does Checking My Credit Report Hurt My Score?

While this is a common misconception, you can rest assured that checking your credit report won’t lower your credit score. Checking your own credit is what’s known as a “soft inquiry” or “soft pull,” which doesn’t hurt your credit. “Hard” inquiries can ding your score, but these are used by creditors when making lending decisions, not for checking your own credit report.

How to Get a Free Credit Report

By law, everyone is entitled to receive one free credit report from each of the three major credit bureaus once every 12 months. You can order all three at the same time or order each individual report one at a time.

Some people like to spread them out and get a free credit report from a different bureau every four months so that they can regularly check their credit reports for errors and inconsistencies. Each credit bureau is a private, for-profit company, and they don’t share information, so you could have errors on one of your credit reports but not the others.

Free credit monitoring websites like CreditKarma provide free credit reports and scores.

The best way to check your credit report for free is to order your free credit report from annualcreditreport.com. In fact, this is the only website authorized to provide the annual free credit report you are legally entitled to, according to the FTC—so beware of other sites claiming to offer free credit reports or free trials, especially if they ask for your credit card information.

However, there are now several free credit report websites that earn money through advertising and are thereby able to offer free credit monitoring services. Sites that offer completely free credit reports include:

CreditKarma
CreditSesame
WalletHub
Bankrate

When Else Can I Get a Free Credit Report?

You can also check your credit report for free if you have been denied credit because of the information in your credit report. You are entitled to get a free credit report from the bureau who provided the report that the lender used to make their decision.

You are entitled to a free credit report if you are unemployed and applying for jobs.

For example, if the lender who denied you credit looked at your Experian credit report, you can request your Experian free credit report. The adverse action letter informing you of the reason for your denial should have instructions on how to request your free credit report.

There are a few more cases in which you can qualify for an additional free credit report, including:

If you are unemployed and planning to look for work.
If you receive government assistance.
If you are a victim of identity theft.

Although experts recommend checking your credit reports at least once a year, the Consumer Financial Protection Bureau (CFPB) estimates that less than one in five consumers get copies of their credit reports each year. Don’t miss out on this opportunity to get your credit report for free so you can make sure your credit report is accurate and identify any problems before they get worse.

Can I Get a Free Credit Report Directly From the Credit Bureaus?

You can also get your credit report directly from each of the credit bureaus, but you may have to pay a fee if you go this route. If you want to get a credit report for free, your best bet is to order from annualcreditreport.com.

However, some people may want to check their credit reports more than once a year, so we’ll discuss additional options for obtaining your credit reports below.

Experian Credit Report

You can get a free Experian credit report that refreshes every 30 days through Experian’s website. They also offer paid options that come with additional information. The Experian free credit report does not include a free credit score.

Equifax Credit Report

You can get your TransUnion and Equifax free credit reports on third-party websites.

While you cannot get an Equifax free credit report from the bureau directly, you can pay a fee to access your Equifax credit report and score. To get your Equifax credit report, visit their website.

You can also view your free Equifax credit report and score through CreditKarma, which updates once a week.

TransUnion Credit Report

Accessing your TransUnion credit report requires signing up for a paid monthly subscription service with TransUnion. However, you can get a free TransUnion credit report from CreditKarma or NerdWallet.

How to Dispute Errors on Your Credit Report

Unfortunately, studies have shown that as many as one in five consumers may have errors on their credit reports, and about one in 20 have errors that are significant enough to potentially lower their credit scores. This means it is crucial to monitor your credit reports regularly and be aware of how to fix errors on your credit report.

The credit bureaus offer online forms to submit credit report disputes, but experts warn against using this option, as it does not allow you to write a detailed explanation of why you are disputing the information or provide sufficient supporting evidence. This leaves room for the credit reporting agency to deny your claim because you did not provide enough information.

The best way to dispute a credit report is to write a detailed credit report dispute letter and mail it to the bureau along with plenty of documentation verifying your identity and supporting your claim.

Once a dispute has been filed, the bureaus typically have 30 days to investigate the claim. If they verify that the item is accurate, it will remain on your report; if not, they must either update the item with the correct information or delete it entirely.

Errors on your credit report can, unfortunately, lead to bad credit. For this reason, checking your credit report regularly and disputing any errors is an essential step in maintaining your financial health.

It’s important to check your credit report for errors regularly.

Check out additional tips in our article about do-it-yourself credit repair.

If you have a lot of errors on your credit report or if you have been the victim of identity theft, it may also be worth considering hiring a reputable credit repair service to assist you in the dispute process.

Which Errors Can You Dispute?

The law requires that the information in your credit reports must be accurate, complete, timely, and verifiable. Anything that does not meet these requirements can be disputed.

Technically, you can dispute anything in your credit file, but that doesn’t mean you should try to dispute things that you know are accurate. The credit bureaus are allowed to ignore “frivolous” claims, and if they verify something to be true, it will stay on your credit report.

For more tips on how to dispute a credit report, check out this article from creditcards.com.

Quick Credit Report Facts

A credit report is a detailed report on your credit history prepared by one of the credit bureaus: Experian, Equifax, and TransUnion.
The information in your credit report is used to calculate your credit score.
Checking your credit report does not hurt your score.
You are entitled to a free credit report from each of the three bureaus once a year, which you can order from annualcreditreport.com.
You can dispute errors on your credit report by mailing a credit report dispute letter and supporting documentation to the credit bureau.

Read more: tradelinesupply.com

Let’s Get to the Bottom of These Credit Myths

September 22, 2019CreditBy toptierfinancial

Myths and misinformation about credit scores, credit reports, and credit repair are extremely common. Unfortunately, many people believe these myths, and their credit suffers as a result of taking incorrect actions.

Let’s get to the bottom of these credit myths and learn the truth about them so you can start improving your credit the right way.

Myth: Everyone automatically has a credit score.
Fact: 1 in 5 adults in the United States do not have credit scores.

A report by the Consumer Financial Protection Bureau (CFPB) found that one-fifth of adults in the United States do not have enough credit data to calculate a credit score by traditional methods. These consumers are called “credit invisibles.”

Low-income consumers are particularly susceptible to credit invisibility due to lack of access to traditional credit products. Some consumers may be credit invisible for other reasons, such as a voluntary decision not to use credit.

For those that do not use credit for whatever reason, it is likely that they do not have enough of a credit history to generate a credit score.

Consumers that are credit invisible may be able to generate a credit record by piggybacking on the good credit of others, but don’t assume that everyone has a credit score just by virtue of existing.

Myth: Checking your credit report will hurt your credit score.
Fact: Checking your own credit will not hurt your score.

Checking your own credit report results in what is known as a “soft pull,” which means the inquiry does not affect your credit score.

To understand the difference between hard and soft inquiries and how they affect your credit score, see our article, “Are Inquiries Really Killing Your Credit?”

Myth: Your income affects your credit score.
Fact: Your credit score does not look at your income.

However, your income can affect your credit indirectly in that it influences the “five C’s” that have been shown to predict credit performance: capacity to pay off debts, the collateral backing a loan, capital available to repay a loan, conditions that affect income and expenses, and the character of the borrower.

Your capacity to pay off debts as well as the collateral and capital they have available to repay loans may all have a relationship with your income.

That’s a big part of the reason why low-income consumers are 8 times more likely than high-income consumers to have no credit score at all. In consumers that do have credit scores, those who reside in low-income areas have lower credit scores. In addition, low-income consumers are 240 percent more likely to have their credit file originated due to derogatory items such as collections.

So while your income is not technically incorporated into your credit score, it can definitely influence your ability to repay debts, which is the basis of a credit score.

Myth: You only have one credit score.

Each consumer can have dozens of different credit scores.

Fact: There are many different credit scores.

There are two general types of credit scores: FICO scores, developed by Fair Isaac Corporation, and VantageScore, developed by the three major credit bureaus (Equifax, Experian, and TransUnion).

FICO 8 is the credit score most commonly by lenders today, but in some industries, older models or industry-specific models are used instead. For example, there are FICO scores tailored specifically toward auto loans and credit cards, and mortgage lenders are known to use the older FICO score versions 2, 4, and 5. Plus, FICO scores are different for each credit bureau.

VantageScore, which is increasingly used by some lenders as well as for consumer credit education, also has a few versions. The latest version is VantageScore 4.0, but VantageScore 3.0 is still the most commonly used version today.

Altogether, between the many versions of FICO scores and VantageScores, consumers can have dozens of different credit scores.

Myth: Paying half of your minimum payment twice a month counts as two full payments and tricks the system into giving you twice the credit score boost.
Fact: Dividing your bill in half and making two payments is the same as paying the full amount once.

This credit myth is unfounded yet often repeated.

If this “credit hack” sounds a little too good to be true, that’s because it is. It is simply not true that you can “trick the system” into thinking you have made two full payments by making two half payments.

Making a payment on a credit account affects two main factors of your credit score: payment history and credit utilization. Let’s discuss each factor individually.

When it comes to your payment history, making a partial payment that is less than the minimum amount due does not satisfy the requirement and will not count as an on-time payment. Only once you have made the second payment for the other half of the amount due will you have satisfied the requirement to be considered paid on time. Therefore, you do not gain any extra benefit to your payment history from dividing your payment into two parts instead of paying the full amount at one time.

As an example, let’s say you have a bill due on the 30th and the minimum amount you must pay is $50. We have laid out the two payment scenarios in the table below.

Scenario 1: Pay the full amount in one payment
Scenario 2: Make half of the payment twice

Date
Amount Paid
Payment Status
Date
Amount Paid
Payment Status

15th

15th
$25
Insufficient payment—$25 still due

30th
$50
Paid on time
30th
$25
Paid on time

As you can see from the table, in both scenarios, you only get the benefit of paying your bill on time once per billing cycle, not twice.

Now let’s discuss the utilization factor. Continuing with the same example, the total amount you are paying toward the account is $50 in both scenarios. Therefore, the overall improvement in your utilization ratio is going to be the same either way.

Now, if the reporting date for that account is in between the first and second payments, since you have already sent a partial payment, you may temporarily get a small boost from having a slightly lower utilization ratio when the account reports to the credit bureaus. But at the end of the billing cycle, the result will be the same.

If you don’t have any credit history, you can being building credit by piggybacking on someone else’s good credit.

If you decide to make extra payments in addition to your minimum payment, which is ideally what all responsible borrowers should be doing, that can certainly help your credit score by speeding up your debt repayment. But simply splitting the minimum payment into two payments won’t do anything to boost your score.

Myth: If you don’t have credit history, you’ll never be able to get credit.
Fact: You can start building credit by piggybacking.

While it can definitely be more difficult to get credit when you don’t have any credit history to begin with, it’s not impossible. There are credit products out there designed for people with no credit or bad credit, such as secured credit cards and credit-builder loans.

Another way to start building credit fast is by piggybacking off of the good credit of someone else. You could have someone you trust cosign on a loan or open a joint account with you, or you could become an authorized user on someone else’s seasoned tradeline.

If you are not lucky enough to know someone who has a seasoned account with perfect payment history that they could add you to, consider purchasing tradelines from a reputable tradeline company.

Myth: Paying off a collection will “re-age” the debt because the account falls off your credit report based on the date of last activity.
Fact: Collections fall off your credit seven years after the initial delinquency and cannot legally be re-aged.

It is illegal to “restart the clock” on collections.

If you’ve read our article about collections on your credit report, then you know that it is the date of first delinquency (DOFD) that determines when the collection will be removed from your credit report, not the “date of last activity” (DLA).

The reason why some people may believe this myth is because shady debt collectors sometimes illegally change the date of first delinquency to the date of last activity in an attempt to re-age the debt.

As we said, this practice is illegal. If you notice that a debt collector has improperly changed any information about a collection account on your credit report, you have the right to dispute the inaccurate information.

Myth: Paying off a collection will boost your credit score.
Fact: Paying off a collection may or may not raise your score depending on which credit score is used.

While it makes sense to assume that paying off a collection should increase your credit score, that is not always the case. In fact, more often than not, this is not the case, although it depends on which credit score is being used.

With FICO 8 and all previous FICO scores, both paid and unpaid collections are categorized as major derogatory items on your credit report. Therefore, paying off the account will not change how it is considered by the credit scoring algorithm, which means your score may not go up at all.

On the other hand, FICO 9, VantageScore 3.0, and VantageScore 4.0 ignore paid collection accounts, so your score should recover after paying off a collection if one of these credit scoring models is being used.

Myth: You should close accounts you’re not using.
Fact: You should keep accounts open and use them periodically.

While you might think that closing accounts you don’t need will help your credit score, the opposite is actually true, especially when it comes to revolving accounts such as credit cards.

The main reason for this is that credit utilization is an important part of your credit score, and closing credit card accounts will hurt your utilization ratio by decreasing your credit limit.

It could also hurt your mix of credit, although that’s a less important factor.

In addition, payment history is the number one factor that helps your score. It’s better for your credit to keep the account open, use it for small purchases here and there or a monthly subscription, and pay it off every month to keep building more positive payment history.

The exception to this is if an account comes with an annual fee that’s no longer worth the price or if you can’t resist the temptation to overspend.

Myth: Closed accounts don’t affect your credit.
Fact: Closed accounts can have a significant impact on your credit.

Although we just discussed why you shouldn’t necessarily close old accounts, that’s not to say that closed accounts don’t impact your credit. They certainly can, particularly when it comes to your credit age.

Closing an account does not remove its payment history or age from your credit report, so closed accounts still contribute to your credit age. In addition, accounts can continue to age even after they have been closed.

So although it’s best to keep accounts open if you can, having closed accounts on your credit report is not a bad thing. If the account was closed in good standing, it will likely continue to help your credit.

Carrying a balance on your credit cards is expensive and does not help you build credit. Photo by Hloom on Flickr.

Myth: Carrying a balance on your credit cards will help your credit.
Fact: Carrying a balance will not help you build credit and it will cost you interest fees.

While it is important to use credit regularly when building credit, it’s not necessary to carry a balance on your credit cards from month to month. If you do this in an attempt to build credit, you will be wasting money by paying unnecessary interest.

The best way to build credit using your credit cards is to use them responsibly and then pay the full balance due each month, or even make multiple payments each month to keep your utilization ratio as low as possible.

Myth: Shopping around for the best rates on a loan will hurt your credit score.
Fact: Getting loan estimates from multiple lenders will not hurt your score if you complete the process within a specific time window.

Credit scoring algorithms understand that it’s smart to shop around for the best rates on a loan, not risky. Therefore, credit scores typically have ways of preventing the series of multiple inquiries that result from this process from hurting your score excessively.

If you are applying for student loans, mortgages, or auto loans, FICO scores allow a certain time frame for you to shop around, only counting one hard inquiry to your credit report for this time period. For older FICO scores, the time window is 14 days; for newer FICO scores, the time window is 45 days.

In addition, FICO scores have a 30-day hard inquiry “buffer,” meaning that the algorithm ignores any inquiries that occurred within the past 30 days when calculating your score.

VantageScore uses a simpler method: it groups all inquiries made within a 14-day window of each other together and counts those all as one inquiry, regardless of what types of accounts the inquiries were for.

Myth: You can fix your credit by disputing everything on your credit report.
Fact: Disputing everything on your credit report could get you in legal trouble and may not even help your credit.

If there is information on your credit report that is inaccurate, outdated, incomplete, or unverifiable, of course you would want to dispute those items with the credit bureaus. But it’s not necessarily a good idea to dispute negative items on your credit report that are accurate.

First of all, the derogatory items won’t necessarily get deleted from your credit report, especially if you don’t provide proof that they are inaccurate. They might just get updated with the correct information, or they may get deleted temporarily until an investigation determines the items are valid and they go right back on your credit report.

Furthermore, the credit bureaus don’t have to investigate disputes that are deemed “frivolous,” and they could decide that some of your disputes are frivolous if you are disputing every item in your credit file, regardless of accuracy.

Plus, lying on a credit dispute could be considered fraudulent. According to the FTC, “No one can legally remove accurate and timely negative information from a credit report.”

Even if you were to get away with disputing everything on your report, this might not necessarily help your credit as much as you hoped. If you’ve gone through an aggressive credit sweep and have nothing left on your report, then you essentially have no credit history and likely no credit score, which could be just as problematic as having bad credit.

Myth: CPN numbers can be used in place of social security numbers to create a new, clean credit file.

Using a CPN to apply for credit is a federal crime. Photo via seniorliving.org.

Fact: CPNs are illegal and using one to apply for credit is a federal crime.

Although you might have heard some people claim that “credit profile numbers” or credit privacy numbers” are a legitimate way to protect your privacy or wipe your credit slate clean, in reality, there is no legitimate or legal source for CPN numbers.

Most of the time, these numbers are either fake social security numbers that have not been created yet or real SSNs that have been stolen from children, the elderly, deceased people, people who are incarcerated, and people who are homeless. Either way, using a CPN means getting involved in identity fraud, which is a federal crime.

The Social Security Administration and the Federal Trade Commission have both explicitly stated that applying for credit using a CPN is illegal and that those who sell CPNs are scamming consumers.

Learn more about the dangers of CPNs in our article.

Myth: The credit score you check online is the same one lenders see when they pull your credit.
Fact: Lenders often do not use the same credit scores that are provided for free online.

When you check your credit score for free online, the credit score you see is most likely going to be a VantageScore. This is the score most commonly used by free online services such as Credit Karma.

The majority of lenders, however, primarily use FICO scores, although some lenders are now starting to use VantageScore. Just keep in mind that the score you see online may not be the same as the score lenders see, as there can often be a significant difference between your VantageScore and your FICO score.

If you want to check your FICO score for free, check with your credit card issuer, since many now offer this service.

Myth: If you don’t have any debt, you will have a good credit score.
Fact: You need to use credit to build your credit score.

Having good credit doesn’t just come down to the amount of debt you have—that’s just one part of your credit score. Payment history is the most important part of a credit score, so if you’ve never had debt and you don’t have any payment history, you might not even have a credit score at all.

To get a good credit score, you have to use some form of credit and demonstrate that you can use credit responsibly by building up a positive payment history over time.

Myth: There’s no need to check your credit report until it’s time to apply for a big loan.
Fact: It’s important to monitor your credit regularly.

Waiting to check your credit score until you need to apply for credit is a mistake because there could be errors on your credit report bringing your score down. Studies estimate that about one-fifth of consumers have at least one error on their credit report, some of which could be serious enough to result in higher interest rates, less favorable loan terms, or being denied credit.

It’s important to keep an eye on your credit so that you can correct errors and fight fraud as soon as possible instead of waiting until it’s too late.

Myth: A late payment will make your score go down by 50 points.
Fact: There is no set amount of points that is associated with any particular item on your credit report.

While it is certainly possible that a 30-day late payment could cause a 50-point drop (or more) in someone’s credit score, this is not always going to be the case. There is no fixed number of points that your score will go up or down by for each item on your credit report. Rather, the way in which a late payment affects your score is always going to depend on your individual credit profile.

There is no set amount of points associated with missing a payment.

Credit scoring algorithms are very complex and they incorporate hundreds of variables, such as how recent the late payment is, whether you have other late payments in your credit history, and how severe the delinquency is, not to mention the myriad other variables associated with the other categories within a credit score.

Because delinquencies on your credit report are always going to be relative to whatever else is in your file, there is a “diminishing returns” effect where the first late payment hurts your score the most and each subsequent late payment tends to have a smaller impact. Someone who has a high credit score and has never missed a payment before is going to experience a severe drop from their first missed payment, whereas someone who already has lates on their record and a lower credit score is going to be hurt less by a subsequent late payment.

According to credit expert John Ulzheimer in a blog article, “Delinquencies, like inquiries, do not have independent value… It is entirely inappropriate and incorrect to say that ‘X’ lowered my score by ‘Y’ points.”

He continues, “The late payment didn’t lower your score but because adding a late payment to a credit report moves other things around it caused your score to be different than it was before the late payment was added. If your score is 50 points lower it’s not as if the new late payment lowered your score 50 points…but because the addition of that item caused a different evaluation of EVERYTHING on your credit reports…the new reality for you is 50 points lower.”

The same principle goes for other items on your credit report as well, not just late payments.

Myth: You don’t have to worry about your kid’s credit.
Fact: You should keep an eye on your kid’s credit report, too.

The proliferation of scammers and hackers stealing people’s private information means even your kid’s credit profile could be at risk of identity theft. When people use “credit profile numbers” (CPNs), for example, these numbers are often real social security numbers stolen from children.

Make sure you monitor your kid’s credit in addition to your own.

You don’t want to wait until your child is grown up and ready to apply for credit to realize they have bad credit as a result of identity theft. Consider freezing your kid’s credit to prevent fraudsters from opening accounts in their name.

Myth: Everyone’s credit score is calculated in the same way.
Fact: Credit scores have “scorecards” that categorize consumers and score them differently.

You already know that credit scoring algorithms are extremely complex, but what many people don’t know about is the “scorecards” or “buckets” within each credit scoring model. These “buckets” consist of different categories of consumers.

For example, according to John Ulzheimer, “There are scorecards for thin files or those with few accounts, bankruptcy, derogatories, and those with clean credit files… Comparing like populations gives this population an opportunity to be considered based on [the] behavior of that group rather than a comparison to another, better group.”

The credit scoring formula is different for each bucket. In other words, items on your credit report can be treated differently based on which scorecard you fall into.

Sometimes your credit score changes in a way that you don’t expect. For example, perhaps an inaccurate collection account got deleted off of your credit report and your score went down, instead of up. This could be because you changed scorecards as a result of the deletion, causing your credit score to be calculated in a different way. Essentially, you might now be at the bottom of a different bucket instead of at the top of your previous bucket.

It’s always good to keep the concept of scorecards in mind, especially when trying to predict any kind of change to your credit score. You can never guess exactly how your score will change because of all the complexities and trade secrets that go into credit scores.

Conclusions

Unfortunately, there are tons of credit myths out there, and believing them may lead you to mismanage your credit and eventually end up with poor credit. We hope that this article helped to dispel many of the misconceptions about credit and helped you get started on the path to better credit.

What credit myths have you heard of? Did you use to believe any of these? We’d love to hear from you, so share your experience with us in the comments!

Read more: tradelinesupply.com

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