We’ve written before about the problem of credit invisibility, which is when a consumer does not have a credit score. Millions of consumers are credit invisible in the United States, which represents a serious obstacle in the path to financial success in a society where credit is interwoven with so many aspects of our lives. You yourself may even be credit invisible and looking for a way to become credit visible by gaining credit history.
In order to be able to generate a credit score, your credit report has to meet certain requirements. These requirements are slightly different depending on whether the credit scoring model being used is a FICO score or a VantageScore.
FICO Score Minimum Credit Scoring Criteria
You must have at least one undisputed tradeline.
A tradeline is an account on your credit report. This may include credit cards, lines of credit, installment loans, etc. (Other items on your credit report that are not accounts and therefore are not considered tradelines include collections, judgments, tax liens, bankruptcies, and inquiries.)
In order to be included by credit scoring models, the tradeline cannot be disputed.
The undisputed tradeline must be at least six months old.
At least six months of credit history are needed in order to accurately predict your likelihood of defaulting in the future, which is what credit scores are designed to do. Trying to come up with a credit score using fewer data points might cause the score to be less predictive of your actual credit risk, which could create problems for lenders.
You must have recent activity on your credit report (within the past six months).
To meet this requirement, you must have at least one undisputed tradeline that has been updated within the past six months. Don’t worry, this can be the same tradeline that qualifies you for the prior two criteria as long as it has reported activity within the past six months, or it can be a different account.
You cannot be listed as “deceased” on your credit report.
Credit scores cannot be created for individuals who are deceased (or appear to be deceased due to an error).
If your credit profile satisfies these criteria, then you will be able to qualify for any FICO score regardless of which generation it may be.
VantageScore Minimum Credit Scoring Criteria
Compared to FICO scores, the VantageScore credit scoring models have less stringent requirements on who can qualify for a credit score.
You cannot be listed as “deceased” on your credit report.
Like FICO scores, VantageScores also do not calculate credit scores for deceased consumers.
You should have at least one or two months of credit history with any credit bureau.
According to MoneyCrashers.com, “the VantageScore model typically produces scores for consumers with one to two months of credit history, regardless of which bureau reports that activity.” The account or accounts do not need to have six months of age in order to be scored.
The company claims that the VantageScore 4.0 and 3.0 models can provide credit scores to 40 million consumers who cannot be scored using other types of credit scoring models since it is easier for consumers with limited information in their credit files to meet the minimum scoring criteria.
What the Lender Sees When You Do Not Have a Credit Score
If a lender tries to pull your credit score and you do not have one for any of the above reasons, they will instead receive what is known as a “reject code” or a “failure code.”
This reject code indicates to the lender that you have failed to meet the minimum credit scoring criteria and which criteria you did not satisfy.
Watch the video on this topic featuring seasoned credit professional John Ulzheimer below, or go to our YouTube channel to subscribe and see more credit-related videos!
We’ve written before about the problem of credit invisibility, which is when a consumer does not have a credit score. Millions of consumers are credit invisible in the United States, which represents a serious obstacle in the path to financial success in a society where credit is interwoven with so many aspects of our lives. You yourself may even be credit invisible and looking for a way to become credit visible by gaining credit history.
In order to be able to generate a credit score, your credit report has to meet certain requirements. These requirements are slightly different depending on whether the credit scoring model being used is a FICO score or a VantageScore.
FICO Score Minimum Credit Scoring Criteria
You must have at least one undisputed tradeline.
A tradeline is an account on your credit report. This may include credit cards, lines of credit, installment loans, etc. (Other items on your credit report that are not accounts and therefore are not considered tradelines include collections, judgments, tax liens, bankruptcies, and inquiries.)
In order to be included by credit scoring models, the tradeline cannot be disputed.
The undisputed tradeline must be at least six months old.
At least six months of credit history are needed in order to accurately predict your likelihood of defaulting in the future, which is what credit scores are designed to do. Trying to come up with a credit score using fewer data points might cause the score to be less predictive of your actual credit risk, which could create problems for lenders.
You must have recent activity on your credit report (within the past six months).
To meet this requirement, you must have at least one undisputed tradeline that has been updated within the past six months. Don’t worry, this can be the same tradeline that qualifies you for the prior two criteria as long as it has reported activity within the past six months, or it can be a different account.
You cannot be listed as “deceased” on your credit report.
Credit scores cannot be created for individuals who are deceased (or appear to be deceased due to an error).
If your credit profile satisfies these criteria, then you will be able to qualify for any FICO score regardless of which generation it may be.
VantageScore Minimum Credit Scoring Criteria
Compared to FICO scores, the VantageScore credit scoring models have less stringent requirements on who can qualify for a credit score.
You cannot be listed as “deceased” on your credit report.
Like FICO scores, VantageScores also do not calculate credit scores for deceased consumers.
You should have at least one or two months of credit history with any credit bureau.
According to MoneyCrashers.com, “the VantageScore model typically produces scores for consumers with one to two months of credit history, regardless of which bureau reports that activity.” The account or accounts do not need to have six months of age in order to be scored.
The company claims that the VantageScore 4.0 and 3.0 models can provide credit scores to 40 million consumers who cannot be scored using other types of credit scoring models since it is easier for consumers with limited information in their credit files to meet the minimum scoring criteria.
What the Lender Sees When You Do Not Have a Credit Score
If a lender tries to pull your credit score and you do not have one for any of the above reasons, they will instead receive what is known as a “reject code” or a “failure code.”
This reject code indicates to the lender that you have failed to meet the minimum credit scoring criteria and which criteria you did not satisfy.
Watch the video on this topic featuring seasoned credit professional John Ulzheimer below, or go to our YouTube channel to subscribe and see more credit-related videos!
When you are paying for purchases, is it better to use a debit card or a credit card?
The answer depends on which features and advantages are important to you. In a Credit Countdown video, credit expert John Ulzheimer compares the pros and cons of credit cards and debit cards in regards to several different metrics, such as fraud protection and credit-building ability.
Read the article about this subject below and then catch the Credit Countdown video at the bottom of the page or on our YouTube channel.
The Basics: How Debit Cards and Credit Cards Work
Credit cards and debit cards may look very similar and feel similar when you make a purchase, but the two payment methods work completely differently.
A debit card is linked to your checking account. When you pay for something using a debit card, the money you spent is being debited directly from your bank account. In other words, you are using your own money to pay for the item immediately.
A credit card is, of course, a form of credit, meaning that you are borrowing someone else’s money. In this case, the credit card issuer is your lender. When you swipe a credit card, you are essentially borrowing money from the bank to pay for the purchase with the agreement that you will pay back the debt, plus any applicable interest charges and fees, later.
Credit cards are revolving credit accounts, which means you have the option to carry a balance from month to month while making only the required minimum payments instead of paying the full balance when you get the bill.
Fraud Protection
If a fraudster gets ahold of your card, which type offers better protection?
With a debit card, fraudulent purchases have already deducted the funds from your checking account, and it may be difficult to get your money back.
If your credit card is stolen, it’s the bank’s money that is directly at risk, not yours. Beyond that, credit cards generally have excellent fraud protection policies.
The Fair Credit Billing Act (FCBA) mandates that you, as a consumer, can only be held liable for a maximum of $50 in the event of credit card fraud. Even better, the major credit card networks all offer $0 fraud liability policies, which means nothing has to come out of your pocket if your credit card is used fraudulently.
Credit cards provide strong fraud protection policies to limit your liability if your credit card information gets stolen.
Credit Building
There’s no comparison when it comes to credit building: only credit cards can help you build a credit history. The credit card issuer reports your activity to the credit bureaus, allowing you to accumulate credit age and on-time payment history if you manage the account properly.
The credit limit of your credit card also contributes to your revolving utilization, which may help your credit score as long as there is not a high balance on the account.
Obviously, debit cards are not a form of credit because you are not borrowing money. Therefore, you do not make payments to a lender and so your activity is not reported to the credit bureaus. For this reason, debit cards do not show up on your credit reports and cannot help you build credit.
Spending Capacity (Buying Power)
The buying power of a debit card is limited by how much money you keep in your bank account. It’s not necessarily a good idea to keep a lot of money in your checking account, where it is likely earning very little interest compared to what you could earn by investing the funds elsewhere.
Credit cards, on the other hand, typically provide more buying power because you are only limited by the credit limit set by the credit card issuer, which may be quite generous if you have a decent credit score. Since you do not need to pay off the balance immediately, you do not have to worry about maintaining a large stash of cash in your bank account.
To boost your credit card spending capacity even more, try some of the tips in our article on increasing your credit limit.
Usability
Certain transactions require you to use a credit card or are much easier to complete with a credit card.
This includes many activities related to traveling, such as renting a car or paying for a hotel room. In addition, such businesses may place a temporary “hold” on your account, which is not as much of an issue when you have available credit on your credit card compared to having a hold placed on your checking account, which could cause other transactions to be declined.
Budgetary Control
This is the category where debit cards excel. If you struggle to control your spending and stay within a budget, it’s actually a good thing to have less buying power and no access to credit.
Credit cards, if used correctly, don’t require you to get into credit card debt in order to get the advantages of using a credit card. However, the higher spending limit and the ability to carry a balance can be powerful temptations to buy more than you can afford to pay off.
Summary
So, which payment method wins in your opinion? Use the table below to decide.
Debit Cards Credit Cards
Source Your bank account The credit card issuer
Fraud Protection Limited Strong
Credit-building Ability No Yes
Buying Power Limited to the balance of your bank account Limited by your credit limit
Usability Limited in some situations Widely accepted
Budgetary Control Yes No
Check out the Credit Countdown video with John Ulzheimer on our YouTube channel for more information about credit cards vs. debit cards!
Myths about credit, unfortunately, are extremely common, even among people who purport to repair credit. We’ve previously compiled a list of common credit myths, which you can find in our Knowledge Center.
In this post, we’re going to focus on the top three credit myths that just won’t seem to go away, according to credit expert John Ulzheimer in a Credit Countdown video on the topic. Check out the video version at the end of this post.
Myth 1: Your revolving utilization ratio is worth 30% of your credit score.
While the general category of how much debt you owe does contribute 30% of your FICO score, the specific metrics regarding revolving utilization are just part of that category, not the whole thing. There are several other metrics included in this category, which FICO lists on their website. These include:
The total amount you owe on all of your credit accounts. The amounts you owe on different types of accounts, such as installment loans and credit cards. The number of your accounts that have balances on them. The ratio of how much you still owe on your installment accounts, such as auto loans and student loans.
Therefore, your revolving utilization must necessarily be worth less than 30% of your credit score, although it is true that it is a highly valuable metric.
Myth 2: Closing an old credit card means the age of the card no longer counts toward your credit score.
Prominent sources in the credit arena often advise consumers not to close their oldest credit cards, claiming that this will cause consumers to lose the benefit of the card’s age. In theory, this idea makes sense because your credit age is worth 15% of your credit score and it is directly connected to your payment history, which is worth an additional 35% of your score.
However, the problem with this advice is that you actually do not lose the age of a credit card once you close the account. In fact, according to John, credit cards continue to increase in age and contribute to your average age of accounts even after they have been closed.
Still, it is important to remember that closing a credit card is not completely free of consequence. When you close a credit card account, you no longer get the benefit of the unused credit limit that was associated with the account, which was likely helping your credit score.
Myth 3: Employers can check your credit scores.
In truth, this myth likely exists because employers can check your credit reports, but credit reports and credit scores are not the same thing. Your credit report contains information about your credit accounts, while your credit score is a three-digit number that represents how creditworthy you are deemed to be by the credit scoring model.
Furthermore, the credit reports that employers receive are different from the versions that are provided to lenders, and these credit reports do not come with credit scores.
If there are other credit myths you think we should cover, leave a comment on this article or the accompanying video on our YouTube channel!
Credit cards are not only a useful payment method for making purchases but also an essential component of a solid credit-building strategy.
After all, credit cards are the most common form of revolving credit, which is given more importance than installment credit (e.g. auto loans, student loans, mortgages, etc.) when it comes to calculating your credit score.
Unfortunately, credit cards often get a bad rap because it’s easy to rack up excessive amounts of debt and destroy your credit score if you do not know how to use credit cards properly.
However, when you have the knowledge and ability to use credit cards to your advantage rather than to your detriment, they can be an extremely powerful financial tool to have in your arsenal.
If you’re unsure if using credit cards is the right choice for you or confused about how they work, then keep reading to learn the basics of credit cards that everyone should know.
What Is a Credit Card?
A credit card is a card issued by a lender that allows a consumer to borrow money from the lender in order to pay for purchases.
The consumer must later pay back the funds in addition to any applicable interest charges or other fees.
They can choose to either pay back the full amount borrowed by the due date, in which case no interest will be charged, or they can pay off the debt over a longer period of time, in which case interest will generally accrue on the unpaid balance.
Each credit card has an account number, a security code, and an expiration date, as well as a magnetic stripe, a signature panel, and a hologram. Most credit cards also now have a chip to be inserted into a chip reader rather than swiping the card at the point of sale. In addition, some credit cards offer contactless payment capability.
Credit cards allow consumers to pay for goods and services with funds borrowed from the credit card issuer.
How Do Credit Cards Work?
Although using credit cards may feel like using “fake money” or spending someone else’s money, it’s important to understand that the money you borrow when you pay with a credit card is very much real money that you now owe to the lender.
Credit Cards Are Unsecured Revolving Debt
With most credit cards, the funds you borrow are considered to be unsecured debt because you are borrowing the money without any collateral. That means the credit card issuer is taking on additional risk by giving you a credit card, since there is no collateral that they can take from you if you fail to pay back the debt, unlike with secured debt, such as a mortgage or a car loan.
Furthermore, the lender allows you to decide when and how much you want to pay back the funds instead of requiring you to pay the full balance on each due date. You can choose to only pay the minimum payment and “revolve” the remaining balance from month to month, which extends the amount of time during which you owe money to the credit card company.
Most credit cards now come with a chip in addition to a magnetic stripe.
For the above reasons, credit card interest rates are typically significantly higher than the interest rates for installment loans.
However, credit cards are also the only form of credit where paying interest is optional—there is a “grace period” of at least 21 days before the interest rate for new purchases takes effect, and you only get charged interest if you do not pay back your full statement balance by the due date.
(Keep in mind that the grace period usually only applies to new purchases, as stated by The Balance. This does not include balance transfers or cash advances, which typically begin accruing interest immediately.)
Understanding Credit Card Interest Rates
To reiterate, the interest rate of a credit card technically only applies when you carry a balance instead of paying off your full statement balance each month. However, most people will likely end up carrying a balance on one or more credit cards at some point, so it is still a good idea to be aware of what your interest rates are.
APR and ADPR
The interest rate of a credit card is usually expressed as an annual percentage rate (APR). This is the percentage that you would pay in interest over a year, which can be confusing because interest on credit card purchases is charged on a daily basis when you carry a balance from month to month.
You can find your average daily periodic rate (ADPR), which is the interest rate that you are being charged each day, by dividing the APR of your card by 365.
Average Credit Card Interest Rates
The interest rate of a credit card, expressed as the APR, is important to know if you ever carry a balance on the card.
As of October 2020, the average credit card interest rate as reported by The Balance is 20.23%. However, credit card issuers are allowed to set their APRs as high as 29.99%. It is not uncommon to see APRs upwards of 20%, even for consumers who have good credit.
The highest interest rates are generally seen on credit cards for bad credit or penalty rates that credit card issuers can implement when you are 30 or more days late to make a payment. You may also get penalized with a higher interest rate if you go over your credit limit or default on a different account with the same bank, according to ValuePenguin.
Ask for a Lower Interest Rate
In our article on easy credit hacks that actually work, we suggest trying the simple tactic of calling your credit card issuer’s customer service department and asking for a lower APR. Surveys have shown that a majority of consumers who do this are successful in obtaining a lower interest rate.
Important Dates to Know
Many consumers assume that the payment due date of your credit card is the only important date you need to worry about. While it’s true that the due date is the most important date to be aware of, there are several other dates that are useful to pay attention to as well.
Billing cycle
The billing cycle of a credit card is the length of time that passes between one billing statement and the next. All of the purchases you make within one billing cycle are grouped together in the following billing statement.
This cycle is typically around 30 days long, or approximately monthly, although credit card companies can choose to use a different billing cycle system.
Statement closing date
Your credit card’s statement closing date is not the same thing as your due date, so make sure you know both.
Sometimes referred to simply as the “closing date,” this is the final day of your billing cycle. Once a billing cycle closes and the statement for that cycle is generated, the balance of your account at that time is then reported to the credit bureaus.
You can look at your billing statement to find the closing date for your account. Because of the 21-day grace period, the statement closing date is usually around 21 days before your due date.
Due Date
This is the most important date to know in order to pay your bill on time every month, which is the most influential factor when it comes to building a good credit history. To make it easy for yourself to avoid accidental missed payments, you may want to set up automatic bill payments.
If your due date is inconvenient due to the timing of your income and other bills, you can try requesting a different due date with your credit card issuer.
Promotional offer dates
Many credit cards offer introductory promotions to attract new customers, such as 0% APR, bonus rewards, or no balance transfer fees. To use these offers strategically, you will need to know when the promotional period ends so you can plan accordingly.
Expiration date
All credit cards have an expiration date past which they cannot be used.
Every credit card has an expiration date printed on it, after which you will no longer be able to use that card, although your account will still be open. You just have to get a new credit card sent to you to replace the one that is expiring.
Usually, credit card companies will automatically send you a new card before the original card expires. If this does not happen, simply call the issuer to ask for a replacement credit card.
A Common Credit Card Mistake
Some consumers think that the closing date and the due date are the same thing and therefore believe that if they pay off the full statement balance by the due date, the credit card will report as having a 0% utilization ratio. They may then be confused to find out that their credit card is still reporting a balance to the credit bureaus every month.
However, the statement closing date is usually not the same date as your due date. This is why your credit cards may report a balance every month even if you always pay your bill in full—the account balance is being recorded on your statement date before you have paid off the card.
If you do not want your credit card to report a balance to the credit bureaus, you will need to either pay off the balance early, prior to the statement closing date, or pay your statement balance on the due date as usual and then not make any more purchases with your card until the next closing date.
Credit Card Payments
With credit cards, you have several different options for payment amounts.
Minimum payment
If you only pay the minimum payments on your credit cards, it will take longer to pay off your credit card debt and you will be charged interest.
This is the minimum amount that you are required to pay by your due date in order to be considered current on the account and avoid late fees. Although this may vary between different credit card issuers, typically the minimum payment is calculated as a percentage of your balance.
If you make only the minimum payment every month, it will take you a much longer time to pay off your balance and you will be paying a far greater amount in interest than if you were to pay off your statement balance in full. Check your billing statement to see how the math works out; the credit card company is required to disclose how long it will take to pay off the balance if you only make the minimum payments.
Statement balance
This is the sum of all of your charges from the preceding billing cycle in addition to whatever balance may have already been on the card before that cycle. This is the amount you need to pay if you do not want to pay interest for carrying a balance.
Current balance
This number is the total balance currently on your credit card, including charges made during the billing cycle that you are currently in, so it will be higher than your statement balance if you have made more purchases or transfers since your last closing date. You can pay this amount if you want to completely pay off your account so that it has no balance.
Other amount
You can also make a payment in the amount of your choosing, as long as it is greater than the minimum payment. This is a good option to use if you don’t have enough cash to pay the statement balance in full, but want to pay more than the minimum in order to mitigate the amount of interest you will be charged.
Credit Card Fees
Credit cards often charge various other fees in addition to interest. Here are some common fees to be aware of.
Although you may have access to a “cash advance” credit limit on your credit cards, it is generally not recommended to get a cash advance due to the high interest rates and fees you will have to pay.
Late payment fees
If you do not make the required minimum payment before the due date, the credit card company will likely charge you a late fee somewhere in the range of $25 – $40 (in addition to potentially raising your APR to a penalty rate). If you usually pay on time but accidentally miss a payment for whatever reason, try calling your credit card issuer and asking if they would be willing to reverse the fee since you have been an upstanding customer overall.
Annual fees
Some credit cards charge an annual fee for keeping your account open. Many times this charge may be waived for your first year as a promotional offer to attract new customers. Cards with higher annual fees will often have additional perks and rewards, but there are also plenty of great options for rewards cards that do not charge annual fees.
Cash advance fees
Your credit cards may give you the option to borrow cash in the form of a cash advance. However, this is usually not advised because cash advance interest rates are often significantly higher than your regular interest rate for purchases. In addition, you will most likely be charged a cash advance fee when you first withdraw the money, whether a flat dollar amount of around $10 or a percentage of the amount you take out, such as 5%.
Foreign transaction fees
Some cards charge a fee to use your card to pay for things in other countries. These fees are typically around 3% of the purchase amount. However, there are many credit cards on the market that do not charge foreign transaction fees.
Be sure to check the terms of service of your credit cards for fees such as these so that you can avoid any unexpected charges.
How Credit Cards Affect Your Credit
Credit cards are one of the most impactful influences on your overall credit standing, and they play a role in multiple credit scoring factors.
Building Credit With Credit Cards
One of the major advantages of credit cards is that it allows you to start building a history of on-time payments, which is extremely important given that payment history is the biggest component of your FICO score, making up 35% of it.
All you have to do to get this benefit is use your credit card every so often and pay your bill on time every month.
Click on the infographic to see the full-sized version!
Revolving accounts such as credit cards can have a much greater influence on your credit than auto loans, student loans, and even a mortgage—for better or for worse. They must be managed properly because negative credit card accounts will also have a very strong impact on your credit.
Mix of Credit
Although your mix of credit only makes up 10% of your FICO score, it is still worth considering, especially if you aim to achieve a high credit score or even a perfect 850 credit score.
A good credit mix generally includes various types of accounts, including both revolving and installment accounts. You can see the different types of accounts in our credit mix infographic.
Credit cards may help with your credit mix if you have a thin file or if you primarily have installment loans on your credit report.
They also add to the number of accounts you have, which is a good thing for the average consumer. In fact, as we talked about in How to Get an 850 Credit Score, FICO has stated that those who have high FICO scores have an average of seven credit card accounts in their credit files, whether open or closed.
The Importance of Credit Utilization Ratios
Your credit utilization is the second most important piece of your credit score, which is another reason why credit cards are such a strong influence on your credit.
The basic rule of thumb with credit utilization ratios is to try to keep them as low as possible (both overall and individual utilization ratios), meaning you only use a small portion of your available credit. Ideally, it’s best to aim to stay under 20% or even 10% utilization, because the higher your utilization rate is, the more it will hurt your credit instead of help.
Conclusions on Credit Card Basics
Credit cards can be intimidating, especially when you don’t know how to use them correctly.
It is also true that not everyone wants or needs to use credit cards.
It’s not impossible to build credit without a credit card, but it is more difficult since you would be limited to primarily installment loans, which are not weighed as heavily as revolving accounts, and possibly alternative credit data.
However, for those who are able to use credit cards responsibly and follow good credit practices, they can be an incredibly useful credit-building tool as well as a way to reap some benefits and perks that other payment methods do not provide.
We hope this introductory guide to credit cards provides the knowledge base you need in order to feel confident using credit cards and to take advantage of their benefits.
If you found this article useful, please comment to let us know or share it with others who want to learn more about credit cards!
It’s never a good feeling when you notice that your credit score has dropped. You might feel confused or concerned, and you would probably wonder why your credit score took a dip. Let’s explore some of the possible reasons that could cause your credit score to decline.
Your average of accounts decreased because of a new account.
As we’ve written about many times in the articles in our Knowledge Center, the age of a tradeline is extremely important, as is your overall credit age. This is because credit age is linked to payment history, which is vitally important to your credit health.
Payment history makes up 35% of your credit score and credit age contributes 15% to your score. When you add the two together, you get 50%, which means that half of your credit score is controlled by these two connected factors.
Within the credit age category, your average age of accounts is thought to be one of the most important variables. The more age your tradelines have, the more they can benefit your credit. Therefore, anytime you decrease your average age of accounts, you run the risk of your score decreasing as a result.
So if you recently opened a new primary tradeline or if you were added as an authorized user to an account that lacks age, the decrease in your average age of accounts might be what’s behind your credit score troubles.
Your account balances increased.
Did you use credit to make a large purchase recently? Have you been accumulating more debt by not paying the full balance you charged each month? If either of these scenarios is true for you, that could explain why your credit score took a dive.
As your account balances increase, so does your credit utilization rate. This is bad news for your credit score since credit utilization contributes about 30% of your score.
If you’ve been using your credit card more often without paying it off entirely each month, that could be the source of the change in your credit score.
Low utilization is favorable since it indicates that you are not overextending yourself financially. On the other hand, high utilization shows that you are using a lot of your available credit, which means you are statistically more likely to default on a debt in the future. For this reason, high credit utilization is penalized by credit scoring models.
Fortunately, there are many strategies you can use to overcome the problem of high revolving credit utilization, such as pre-paying your credit card bill before your statement closing date, making more frequent payments throughout the month, increasing your credit limit, or getting a balance transfer card.
When you open a new account, it can hurt your credit score for a few reasons. The first and most important reason is that the account has no age, which means it is going to negatively affect your average age of accounts.
In addition, there was likely a hard inquiry on your credit report as a result of applying for the new loan. In “Are Inquiries Really Killing Your Credit? What You Need to Know,” each recent hard inquiry on your report may affect your credit score by up to five points.
The new account may also have a negative impact on the “new credit” portion of your credit score. Having new credit makes you look like a riskier borrower, which means it could slightly reduce your score.
However, new credit only makes up about 10% of your credit score, so the impact of opening one new account would likely be relatively small and it would diminish over time.
You applied for credit but your application was denied.
Applying for a loan or credit card, whether your application is approved or denied, the resulting hard inquiry could damage your credit score slightly.
As we just mentioned, when you apply for credit, the lender usually has to do a hard pull (AKA a hard inquiry) on your credit report to see if you qualify.
This doesn’t always result in a new credit account being opened. Sometimes, for example, your credit application might get rejected by the lender, or perhaps you may choose to decline the terms you were offered and not proceed with opening the account. (Note, however, that when you apply for a credit card, typically the account is automatically opened when you get approved for the card.)
Unfortunately, even if you didn’t actually end up opening a new account, the fact that you applied for credit can still hurt your score. The hard inquiry still goes on your credit report whether you opened an account with that lender or not.
If you only applied for one account, then your credit score will likely only fall by a few points, if at all. If you applied for several accounts that you didn’t open within the past year, however, it’s possible that you could see a bigger dip in your score as a result of all of those inquiries on your report.
You missed a payment once or twice.
You might think that missing a payment here and there is not that big of a deal, but in reality, it can wreak havoc on your credit score. Recall that payment history is the most important factor contributing to your credit score, weighing in at 35% of your FICO score.
If you are 30 days late on making a payment even one time, this can have a significant detrimental effect on your credit, dropping your score by as much as 60 to 110 points.
If you still fail to make your payment by the following due date, then you get a 60-day late on your credit report, which hurts your credit even more.
30-day and 60-day lates are both considered minor derogatory items on your credit report, so they won’t mess up your credit as much as a major derogatory item.
However, if you get a 60-day late payment added to your credit report, do your best to catch up on payments before another 30 days pass, which is when things get even worse.
You missed a payment for three months in a row or more.
Missing a payment even once can seriously set back your credit score, but the damage will be even worse the longer you put off bringing the account current.
Once you reach 90 days past due on a credit account, that is now considered a major derogatory item, which is the worst possible type of item to have on your credit report. (Other major derogatory items include charge-offs, collections, foreclosures, settlements, judgments, repossessions, public records, and bankruptcies.)
Having a 90-day late on your credit report is certainly going to have a negative impact on your credit. A credit score drop from a major derogatory item will be even more severe and more difficult to recover from than that of a minor derogatory item. In addition, the major derogatory item could scare away potential lenders, making it harder to obtain credit in the future.
If you default on a debt, meaning you did not fulfill your obligations to repay that debt, your creditor can sell your account to a collection agency, who will then try to collect the debt from you. A collection account is also a major derogatory item on your credit report, which means it can seriously hurt your score if you have an account go into collections.
You applied for multiple credit cards in a short period of time.
Applying for multiple credit cards results in hard inquiries on your credit report, which can have a more significant impact on your score than just one inquiry.
Having too many hard inquiries on your credit report in a short period of time indicates that you are seeking a lot of new credit, which is a bad sign to lenders, and it will bring down your score.
With most credit scoring models, inquiries for credit cards are all counted separately, even if they were all around the same time. Since inquiries can each cost your credit score up to five points, that can add up quickly. (The exception to this is the VantageScore credit score, which counts all inquiries made within a 14-day window of each other as one inquiry, regardless of the type of account.)
Furthermore, if you got approved for and opened all of the accounts that you applied for, then you could also end up with too many new credit accounts on your credit report.
One of your credit cards was closed.
Many consumers mistakenly believe the credit myth that it will help their credit if they close some of their accounts. In a way, that makes sense, because it lowers the amount of available credit you have, which reduces the potential amount of debt you could get into if you were to use all of your available credit.
However, that is not how credit scores work, because unfortunately, credit scores don’t always make sense.
The truth is that closing an account almost always hurts your credit instead of helping it.
With revolving accounts, such as credit cards, closing an account reduces your total credit limit by removing the credit limit of that card. When you reduce your credit limit, that action increases your overall credit utilization ratio, meaning that you are now using a larger fraction of your available credit.
This hurts your credit score because having a high credit utilization ratio is penalized by the credit scoring algorithms, whereas maintaining a low utilization ratio is rewarded.
The worst-case scenario for your credit when closing an account is if the account is closed while it still has a balance on it. In this case, that individual account will look like it is maxed out or over the limit because it has a balance but no credit limit. That alone is enough to significantly harm your credit, and the increase to your overall utilization ratio only worsens the problem.
Depending on what else is in your credit file, closing a credit card could also negatively affect your credit mix, which could result in a small credit score drop.
On the plus side, the reason why an account was closed does not play a role in your score, so you won’t be affected more negatively if the card was closed by the issuer than if it was closed at your request.
Have you checked your credit card statements lately?
An unexpected decrease in your credit score could be the result of fraudulent activity on your accounts.
If you see any charges on your statement that you do not recognize, then it could be fraudulent activity that is bringing down your score. Perhaps someone was able to obtain your credit card information by phishing or through a data breach and used it to run up the balance on the card.
It’s important to monitor your credit accounts regularly so that you can catch any suspicious activity early on. Better yet, set up email or mobile notifications on your account that will alert you to fraudulent activity instantly.
If a criminal does manage to get access to your account, report the fraudulent charges to your credit card issuer immediately and ask to have the charges reversed. Most credit card companies have a zero liability policy, which means you won’t be held responsible for paying for any of the fraudulent charges.
You paid less than the minimum payment.
If your cash flow is tight, it can be tempting to send the bank or credit card company a partial payment instead of the full amount that is due that month. You may think that it’s not as big of a deal as not paying at all, because at least you are sending them some of the money.
Unfortunately, it doesn’t work that way. If you do not cover the full minimum payment by the due date, it will not be counted as an on-time payment.
If you can bring the account current before 30 days pass, you may still have to deal with a late fee from your credit card issuer (although it’s worth asking them to waive the fee), but at least the late payment will not show up on your credit report.
On the other hand, if you do not make a sufficient payment and 30 days go by, then you will have a late payment pop up on your credit report, which can definitely take a toll on your credit score.
To prevent this from happening, as soon as you know you will not be able to make the full payment, contact your credit card issuer and ask if they have a financial hardship program or try to negotiate an arrangement with them that allows you to pay what you can without damaging your credit.
You didn’t use your credit card for a long time.
Your credit card issuer might have closed your account if it had been inactive for a long time.
If you don’t use a credit card for a long period of time, it’s possible that your credit card issuer may decide to close your account due to the lack of activity.
As we discussed above, a closed credit card is bad news for your credit since the loss of available credit hurts your credit utilization and it may also damage your mix of credit.
According to The Balance, the credit card company is not required to give you advance notice if they plan to close your account, so it’s best to take proactive measures to prevent this from happening.
To avoid having your card closed due to inactivity, make sure you use it to make a purchase at least once every few months. An easy way to do this is to use the credit card to pay for a subscription service that renews each month. Then, set up automatic bill payments on your credit card and the whole process will be automated.
You finished paying off an installment loan.
Making the final payment on your auto loan, student loans, or mortgage is an exciting accomplishment. Yet, when you finish paying off an installment loan, your credit score may decrease instead of increase.
Even though you now have less debt, which sounds like it would help your credit score, this may not outweigh the negative impact to your mix of credit. The paid-off installment loan will now report as a closed account, which can be harmful to your credit if all you have left is a few revolving accounts.
@LizOfficer shared a real-life example of this on Twitter.
This Twitter user commented that paying off her loan made her credit score go down since it affected her mix of credit.
An account that you are piggybacking on became delinquent.
Sometimes being an authorized user on a credit card or having a joint account can be a risky thing. You are relying on the other person to pay their bills on time and to manage their balances well, otherwise their behavior can compromise your credit.
In other words, an ideal tradeline should have a low utilization ratio, it should have a higher age than your average age of accounts and your oldest account, and most importantly, it needs to have a perfect payment history.
Therefore, you want to avoid being added as an authorized user to a tradeline that has any derogatory marks on it so that those derogatory items don’t get added to your credit file and end up damaging your credit.
That’s the danger of piggybacking on a friend or family member’s credit card—even if the tradeline is perfect when you are first added to it, there’s no guarantee that it will stay that way.
If your authorized user tradeline does get any missed payments on its record, that could definitely hurt your credit, and it would be smart to remove yourself from it immediately. To do so, simply call the credit card issuer and request to be removed from the account, as most banks allow you to do this without needing to go through the primary account holder.
Delinquency on the part of the primary account holder can cause problems if you are piggybacking on someone else’s credit account.
You declared bankruptcy.
Bankruptcy is one of the worst things you can have on your credit report. Since declaring bankruptcy essentially means you are asking to be released from the legal obligation to repay your debts, it shows lenders that you have an extremely high risk of defaulting in the future, so it can have a severe negative impact on your credit score.
There are inquiries on your credit file that you did not authorize.
Unauthorized inquiries on your credit file can unfairly drag down your credit. In our article on credit inquiries, we reported that each hard inquiry on your credit report can potentially cost you up to five points each.
Fortunately, you have the right to dispute any hard inquiries on your credit report that you did not authorize. You can learn more about the credit dispute process in “How to Fix the Most Common Credit Report Errors.”
Your credit file got merged with someone else’s.
Sometimes inaccurate information can get on your credit report not as a result of fraud or because your lender reported it incorrectly, but because your credit file accidentally became mixed with the information of another person.
This is called a “mixed credit file” or “mixed credit report” and it usually occurs with two consumers who have similar names.
If the credit history of the other consumer with whom your file has been mixed contains negative information, that would obviously be detrimental to your score, and you would need to correct the situation by filing a dispute with the credit bureau.
This is an example of why it’s important to check your credit report regularly. If there is incorrect information on your credit report that should be removed, you don’t want to find out about it when you’re trying to apply for credit. You need to catch and correct credit report mistakes early so that they don’t stand in the way of you achieving your financial goals.
You maxed out one or more of your credit cards.
Credit utilization makes up nearly a third of your FICO score, which means it’s critically important to keep your utilization low if you want to maintain a high credit score. Maxing out even just one credit card can have a significant negative impact, and if you max out multiple cards, you’ll be even worse off.
An account on your credit report that you don’t recognize could be an account that someone else fraudulently opened in your name.
We already covered how opening a new account can negatively affect your credit initially, but don’t forget that the same thing can happen if someone else uses your name to sign up for a new account.
If you see that your credit score has decreased, take a look at the inquiries and accounts on your credit report to see if there are any items that should not be there.
You have “double jeopardy” with collection accounts on your credit report.
Debt collection agencies are not known to be the most trustworthy entities and often do not have the best practices when it comes to keeping track of debts and contacting consumers. Information often gets lost or misrecorded when it is transferred between creditors and sometimes numerous collection agencies.
Because of this, some consumers find themselves with more than one entry for the same open collection account on their credit report, which is known as “double jeopardy.”
While the same collection may be listed multiple times due to the account changing hands, only the entity who currently owns the debt should be reporting the account as open.
Fortunately, if a collection is being reported in error, you can dispute the inaccurate information and have the information be corrected or potentially removed altogether.
Your credit report says you missed a payment even though you paid on time.
Dispute any mistakenly reported late payments so that they don’t unfairly affect your credit score.
Since payment history is the most important factor in your credit score, an incorrectly reported missed payment could severely damage your credit, especially if you are starting with very good credit. The higher your score to begin with, the more you stand to lose from a credit mistake.
This type of situation is another example that demonstrates why it’s so crucial to regularly check your credit report. If you always made all of your payments on time, you might assume that you must have a spotless credit record, only to find out at an inconvenient time that a creditor has been incorrectly reporting that you missed a payment.
Keep an eye out for errors like this on your credit report so that you can dispute them right away.
Your credit card issuer reduced your credit limit.
Sometimes, credit card issuers lower the credit limits of their cardholders, even for those who have consistently managed their accounts responsibly.
Unfortunately, they are usually allowed to do this without asking for your permission or letting you know in advance, so it may come as a nasty surprise when you swipe your credit card and get declined, or when your credit score takes a dive because your credit utilization is suddenly much higher.
There are a few reasons why your bank may reduce your credit limit, such as the following:
Credit card issuers sometimes cut credit card limits, which hurts your credit utilization ratio.
Your balances have been increasing, which indicates that you are taking on more debt and might be at a greater risk of defaulting. You missed a payment and your account becomes delinquent. Your account was inactive because you did not use your credit card enough. The economy is down and lenders want to minimize their risk exposure levels.
Regardless of why your credit limit took a hit, the result is the same: with less available credit, your credit utilization increases, which is bad for your score.
If your credit card issuer slashed your credit limit, check out “How to Increase Your Credit Limit” for some useful tips, and don’t be afraid to give your bank a call to ask them to reconsider.
A collection account was deleted from your credit report.
Surprisingly, it is actually possible that getting a collection account removed from your credit report could make your credit score go down instead of up.
By removing a collection account from your credit report, it is possible that you could move from one bucket into another bucket where your score will now be calculated differently. As a result of this new algorithm being applied to your credit report, your score could turn out to be lower than it was when you were in the first bucket.
You haven’t used any credit in a long time.
If you have used credit in the past but not recently, some of your old accounts may have fallen off of your credit report altogether. Accounts that are closed or inactive do not stay on your credit report forever. Positive accounts will generally stay on your credit report for 10 years, whereas negative accounts may stay on your credit report for up to 7 years.
When these old accounts age off of your credit report, you lose all of the credit history associated with them, the most important of which is the payment history. Because you are losing valuable credit history, your score could take a hit.
Those with thin credit files or those who have not used credit in several years will need to focus on building credit in order for their credit score to recover.
Conclusions
When it comes to your credit score, minor fluctuations are normal, so there’s generally no need to fret about losing a few points here and there.
If you are practicing good credit habits and paying all of your bills on time, it’s probably not necessary to watch your credit like a hawk and check your score every single week, and a change of a few points in either direction should not cause you to panic.
However, as we have seen, you don’t want to neglect your credit entirely, since mistakes can and do happen.
In addition, keep in mind that credit moves can sometimes have unexpected results, particularly in cases where you may be migrating from one credit scoring “bucket” to another.
If you see a significant drop in your credit score, that is definitely worth investigating further so that you can understand why it happened, address the issue, and hopefully get some of those credit score points back.
It’s a question we hear all the time from people who are new to the tradeline industry. Perhaps you have even asked it yourself. In this article, we explain how tradelines work and how they can affect your credit.
What Are Tradelines to Your Credit?
While the term “tradeline” simply means any credit account, in our business, it usually refers specifically to authorized user (AU) tradelines, or authorized user positions on someone’s credit card. An AU tradeline is an account on which you are designated as an authorized user, which means you are not liable for the charges incurred on the account. However, the tradeline can still affect your credit file.
How Do Tradelines Work?
When someone is added as an authorized user to someone else’s account, often the full history of the account is then reflected in the records of both the primary account holder and the AU. This is because credit records do not report the date the AU was added to the account. So, as soon as the AU is added, their credit report may begin to show years of history associated with the account.
Therefore, authorized user tradelines can be used as a way to add credit history to someone’s credit report.
One common example of this is when a parent designates their child as an authorized user of one of their credit cards as a way to help them start building credit early in life. In fact, this practice of building credit as an authorized user, often called “credit piggybacking,” is frequently promoted by banks and financial education sites.
What Are Tradelines Used For?
Parents often use piggybacking as a strategy to help their children build credit early in life.
As we mentioned, tradelines can add years of credit history to your credit report. The power of a tradeline is always relative to what is already in your credit file, so if you are interested in building credit as an authorized user, make sure to choose a tradeline that surpasses what you already have in your credit profile.
How Do Tradelines Affect Your Credit?
Adding quality tradelines to your credit file can influence many of the variables that are related to your credit, such as your average age of accounts, age of oldest account, overall utilization ratio, number of accounts, mix of accounts, and more.
The most important factor that tradelines bring to the table is age, because with age also comes perfect payment history. These two factors combined are the most significant influence on one’s credit.
Due to the power of these factors, adding AU tradelines to your credit file is often preferable over opening new primary tradelines. This is because new primary tradelines will have no age and will probably have relatively low credit limits, which can drag down important metrics in your credit file.
Authorized user tradelines, which are authorized user positions on someone’s credit card, can be used to build credit history.
In contrast, authorized user tradelines already have significant age and high credit limits.
Can You Buy Tradelines?
The tradeline industry took this concept of “piggybacking credit,” as it is often called, and created a marketplace where tradelines could be bought and sold. Essentially, people who want to add tradelines to their credit file can pay a fee to be an authorized user on someone else’s credit card, even if the two parties are complete strangers.
Tradeline companies serve as the intermediary, protecting the privacy of both the cardholders and the authorized users and facilitating the transaction.
A marketplace now exists where consumers can pay a fee to piggyback on others’ tradelines as authorized users.
Tradelines have been around since the advent of the modern credit system. Virtually as long as credit cards have existed, people wanted to be able to share access to their account with others, such as spouses, children, or employees.
However, the role of authorized users was not always considered equally by the credit bureaus. Until the Equal Opportunity Credit Act of 1974, creditors often used to report accounts that were shared by married couples as being only in the husband’s name. This prevented women from building up a credit history in their own names.
In response to this unequal treatment, ECOA was passed to prohibit discrimination in lending.
Regulation B is a section of ECOA that requires creditors to report spousal AU accounts to the credit bureaus and consider them when evaluating credit history. Since lenders generally do not distinguish between AUs who are spouses and those who are not, this effectively requires that credit bureaus must treat all AU accounts the same.
The Equal Credit Opportunity Act prohibits credit discrimination.
It was as a result of this policy that the practice of “piggybacking credit” emerged as a common and acceptable way for consumers with good credit to help their spouses, children, and loved ones build credit.
Thanks to ECOA, authorized user tradelines are still weighted very heavily in credit scoring models.
For more on the history of AU tradelines and the policies and regulations that govern our industry, read our article, “Do Tradelines Still Work in 2019?”
Are Tradelines Legal or Illegal?
While Tradeline Supply Company, LLC does not provide legal advice, we can answer this common question by referring to official proceedings and statements from the authorities.
The issue of tradelines and credit piggybacking went all the way up to the U.S. Congress in 2008, when FICO tried—unsuccessfully—to eliminate authorized user benefits from its credit scoring model. They ultimately reversed their stance and decided to keep factoring AU benefits into credit scores thanks to the Equal Credit Opportunity Act of 1974.
The Federal Trade Commission and the Federal Reserve Board have also weighed in on this topic. In 2010, the Federal Reserve Board conducted a large-scale study on piggybacking and found that over one-third of the credit files that could be scored had at least one AU account in their credit profile, which shows that piggybacking credit is an extremely common practice.
After the issue of piggybacking credit was discussed in Congress, FICO admitted that it could not legally eliminate authorized user benefits.
Learn more about your legal right to use authorized user tradelines in our article, “Are Tradelines Legal?”
How Do I Add Tradelines to My Credit Report?
To add tradelines to your credit report, you can either open your own primary accounts or you can be added as an authorized user to someone else’s credit account. For many people, it is difficult to start building credit on their own because creditors are hesitant to lend to someone with no credit history, which is why the authorized user route is an appealing option.
If you are seeking to add authorized user tradelines to your credit report, you can either ask someone you trust to add you to one or more of their accounts or purchase tradelines from a tradeline company. The benefit of buying tradelines as opposed to asking for a favor from someone you know is that all of our tradelines are guaranteed to have perfect payment histories and low utilization.
How Much Does It Cost to Buy Tradelines?
Our tradelines range in price from $150 to around $1,500 depending on two main variables:
The tradeline’s age The tradeline’s credit limit
Our tradelines stay on your credit report for about two months.
Generally, the older the tradeline is and the higher the credit limit is, the more powerful it will be and the higher the price will be (and vice versa). We delve into further details and examples of the cost of tradelines on our FAQ page, “How Much Do Tradelines Cost?”
How Long Does a Tradeline Stay on Your Credit Report?
Our tradelines stay on your credit report for two reporting cycles, which is approximately two months.
After the two months of being an active authorized user is complete, you will be removed from the account and the tradeline will then appear as closed. A closed tradeline will often remain on your credit report for several years.
However, your strategy may vary depending on your specific goals. There are some situations in which the credit limit can be more important. Our in-depth tradeline buyer’s guide that has all the information you need to help you choose a tradeline.
In choosing the right tradelines for you, It is helpful to be able to calculate how a tradeline could affect your average age of accounts and utilization ratios. Try out our custom tradeline calculator, which does the math for you!
How many tradelines you need depends on your specific situation. There are different cases in which buyers may want to get two or three tradelines, or sometimes even more, but there are other cases in which one tradeline will suffice.
If you really want to maximize your results and you have the budget to do so, buying multiple high-quality tradelines is the way to go. However, if you have budget constraints to deal with, it is usually best to focus your resources on one excellent tradeline.
Historically, only those with privilege and wealth have been able to use the strategy of credit piggybacking. Those who do not have family members with good credit to ask for help, or could not afford the high cost of tradelines, had nowhere to turn, so their options for building credit are often extremely limited and very costly.
To us, it does not seem fair that some people have the option of credit piggybacking but others do not. By offering tradelines at affordable prices, we aim to bridge this gap and help provide a chance at equal credit opportunity for all.
Equality, fairness, and justice are all concepts that the United States promotes as some of its highest values.
In reality, the history of our country and society has not always lived up to those values. In fact, our history has proven to be so far from those ideals that we do not even need to mention how far off our society has been in our not so distant past.
Fast forward to now, and many people may believe that our country has worked out all those unfair and unequal practices. But the truth is that in our capitalist society, powerful private institutions provide the backbone of our economy, and the facts paint an interesting picture of how our financial systems really operate.
Do Credit Scores Actually Work?
For decades, lenders have been relying on automated underwriting tools that are largely or entirely based on the contents of one’s credit report. Do these tools succeed at their goal of accurately determining the creditworthiness of consumers?
What Do Credit Scores Do?
A credit score is a number that is supposed to symbolize the credit risk of a consumer. The scale usually ranges from 300 to 850, with lower scores indicating that you have a high risk of defaulting on a loan and higher scores indicating that you have a low risk of defaulting. Generally, credit scores that fall below 579 are considered bad credit, while scores that exceed 670 are considered good credit, and 850 is a perfect credit score.
Each type of credit score, such as a FICO Score or a VantageScore, has a different mathematical formula that uses the data in your credit report to produce your score, which represents the statistical likelihood of you defaulting in the future. The specifics of the credit scoring algorithms are trade secrets, so information about how exactly they work is not available to the public.
Credit Scoring Models Are Flawed
It is estimated that one-fifth of consumers have at least one error on their credit report that has the potential to make them look riskier than they are, which could result in higher interest rates, less favorable loan terms, or being denied credit. In other words, millions of people are negatively affected by inaccurate information on their credit reports.
Furthermore, it is well-known that in our credit system, consumers are rewarded for having debt and penalized for paying in cash, because taking on debt is one of the primary ways of establishing a payment history. You would think that being burdened with more debt would make you a higher credit risk, yet credit scoring models are designed to reward this behavior.
For example, many consumers are unpleasantly surprised to find out that sometimes paying off a loan can actually hurt your credit score. This is counterintuitive because it would seem that your credit risk has decreased now that you no longer have to make payments that loan, and therefore it would make sense for your credit score to go up as a result.
However, that is not how credit scores work. Here’s what really happens in this scenario: the action of paying off the loan would close the account and remove it from your mix of credit, which could have a negative effect on your score.
Clark Abrahams, Chief Financial Architect of SAS Institute, said it well in his testimony before the House Financial Services Committee, asking, “Are we to tell consumers that being responsible in their financial affairs means that they need to modify their behavior so as to maximize their credit score?”
The goal of a credit score is to indicate who is creditworthy and who is not, which should depend on an individual’s ability and willingness to repay an obligation. Yet this quality is not always reflected in one’s credit score. Instead, credit scores are based exclusively on what is and is not in one’s credit file, which often doesn’t tell the whole story.
Is the Credit Scoring System Fair and Equitable?
Just a few years ago, it was revealed that two of the three major credit-reporting agencies that control credit scores—Equifax and Transunion—had been deceiving and taking advantage of consumers.
If you’re familiar with the credit system, it’s not exactly shocking that the credit bureaus have been abusing their power. This is just one example of the dysfunction that runs deep in the credit system and causes widespread harm to consumers.
The Equal Credit Opportunity Act of 1974 was enacted in an effort to prevent discrimination in lending. In the 1970’s, people started to pay attention to credit discrimination against consumers based on age, race, gender, and other factors. In 1972, the National Commission on Consumer Finance revealed that there was widespread discrimination against women in the credit industry. A congressional report identified 13 discriminatory practices used specifically against women.
These discoveries led to the Equal Credit Opportunity Act (ECOA), which prohibits lenders from discriminating against any applicant on the basis of age, gender, ethnicity, nationality, or marital status. Regulation B of ECOA prohibits creditors from requesting information about certain characteristics to prevent lenders from making decisions based on prejudicial assumptions.
Officially, credit discrimination is prohibited. But it is not clear whether ECOA has succeeded in its goal, and many questions remain as to whether there is still inequality in the credit industry.
Is ECOA enforced effectively, or does discrimination still happen? Does the credit scoring system affect population groups differently? Do the factors used in calculating credit scores affect certain individuals grouped by race, gender, age, or other protected characteristics?
Unfortunately, the language of ECOA makes it virtually impossible for those who believe they have been discriminated against to win a lawsuit against a creditor, and the governing federal agencies have not picked up the slack in enforcing ECOA. There is no shortage of data showing that there is disparate treatment of certain groups when it comes to credit scoring.
This is because the credit scoring system not only reflects but perpetuates the economic inequalities in this country.
Who Are Credit Invisibles?
According to the Consumer Financial Protection Bureau (CFPB), about one-fifth of adults in the United States are “credit invisible,” meaning they are unscoreable by traditional credit scoring methods and traditional credit data. The lack of a conventional credit record prevents these consumers from obtaining the financial products and services they need to be successful, since they are seen by lenders as too high of a credit risk.
A study by the Policy and Economic Research Council (PERC) on credit invisibility in Silicon Valley showed that unscoreability is a big problem in low-income areas. However, low-income does not necessarily equate to financially irresponsible.
We can see evidence of this in a study by PERC and the Brookings Institution Urban Markets Initiative, which shows that when alternative data (such as rent and utility payment history) are used in credit ratings, those lacking a traditional credit history have similar risk profiles as those in the credit mainstream. This suggests that most credit invisible consumers do not represent a high risk to lenders.
On the other hand, some of these consumers do have relatively good incomes, but are credit invisible for various reasons, such as increased use of alternative financial technology services instead of traditional financial institutions, a decision to be voluntarily credit-inactive and debt-free, or a cash-based lifestyle due to lack of access to banking services (as in some immigrant populations).
Credit Scores and Income
Low-income consumers are about 8 times more likely than high-income consumers to lack credit records that are scoreable by widely used models. In consumers that do have credit scores, individuals who reside in low-income census tracts have lower credit scores than other income groups, according to the CFPB.
They also found that people in lower-income neighborhoods are less than half as likely as those in upper-income neighborhoods to gain a credit record by relying on the good credit of others (such as through joint accounts or authorized user accounts), and are 240 percent more likely to become credit visible due to negative records.
Lower-income consumers are less likely to have one or more AU accounts, and those that do acquire shorter credit histories from the accounts than those in higher-income areas.
Even after controlling for credit scores, consumers in low-income areas face higher denial rates than other groups.
How Credit Scoring Adversely Affects Certain Races
In a report to Congress on credit scoring and its effects on the availability and affordability of credit, the Federal Reserve Board (FRB) raised concerns that factors in credit-scoring models could adversely affect minorities.
The study determined that on average, blacks and Hispanics have lower credit scores than non-Hispanic whites and Asians, and a gap remained even when controlling for differences in personal demographic characteristics, location, and income.
In addition, for given credit scores, outcomes such as loan performance, credit availability, and credit affordability differed between these groups.
For example, it seems that black individuals pay higher interest rates on auto and installment loans than do non-Hispanic whites with the same credit score. In addition, black and Hispanic consumers experience higher denial rates than other groups with the same score.
Credit Scoring Discriminates by Age
Younger individuals tend to have lower credit scores, which makes sense considering that one of the main factors in credit scoring is the length of credit history.
Unfortunately, this means that young people who may be creditworthy are disadvantaged just by virtue of not being old enough to have a very long credit history. Younger consumers also experience relatively high denial rates.
Other Groups Marginalized by Credit Rating
The unequal effects of credit scoring are not limited to the above groups. It can affect consumers in surprising ways. For example, recent immigrants have lower credit scores than their performance would predict.
Credit invisibility is more prevalent in areas with less digital access to traditional financial service providers, such as in rural areas.
And since no federal law protects LGBTQ people from discrimination, they can still be denied credit with no option for recourse.
Why the Credit System Is Inherently Discriminatory
In the FRB’s report to Congress, they listed the “five C’s,” which are factors that seem to influence the variations in credit performance with race, age, gender, national origin, etc. The five C’s are:
Capacity: income available to pay off debts Collateral: the value of assets backing a loan Capital: the value of assets that do not explicitly back a loan but may be available to repay it Conditions: events that can disrupt income generation or create unexpected expenses that affect a borrower’s ability to make loan payments Character: the financial skills, experience, and/or willingness of a borrower that pertain to their ability to manage financial obligations
The way credit scores are determined privileges those who already have wealth, high incomes, education, and a support system of people who can help them out in a financial crisis.
In contrast, historical discrimination against minorities in the United States continues to affect each of the five C’s in ways that have serious and persistent consequences on credit scores.
In relying on and reflecting past inequality, credit scores also perpetuate that inequality.
According to the National Consumer Law Center, communities of color have less income and far less wealth than white Americans, thanks to centuries of discrimination and exclusion. Redlining, segregation in education, implicit bias in employment, and mass incarceration have prevented communities of color from attaining higher incomes and accumulating wealth.
The racial wealth gap makes it exponentially more difficult to recover from emergencies or financial setbacks. These inequalities take a toll on each of the 5 C’s, which in turn contributes to the higher proportion of credit invisibility and poor credit in minority communities.
Since credit scores are used in decisions that affect housing, insurance, employment, loans and more, poor credit scores mean consumers of color are disproportionately denied credit, affordable housing, jobs and other basic necessities. Expensive loan terms deplete capital and make loans much more difficult to repay, which continues the cycle of bad credit.
The system further burdens those who are already financially strained and provides very few opportunities to improve their situation.
Can We Fix Credit Scoring?
The credit scoring industry clearly has a multitude of problems. It’s no surprise that an inherently discriminatory system meant to serve for-profit companies has not produced equitable results.
Some believe that private companies shouldn’t even be the parties responsible for calculating credit scores. These for-profit corporations harvest our information, use closely-guarded proprietary algorithms to calculate credit scores, and sell this information to other companies in the financial sector.
Their clients are lenders, not consumers, so they do not have an incentive to fairly and accurately represent consumers. Perhaps a system in which this task falls to public institutions would be more accountable to consumers.
Pending currently is the Credit Access and Inclusion Act of 2017, a bill that would amend the Fair Credit Reporting Act to allow the reporting of rent, utilities, and telecommunication payment information to consumer reporting agencies. Even FICO has joined the discourse about financial inclusion, developing credit scores that include alternative data sources to allow millions of previously unscorable consumers a path to credit.
However, most lenders still use FICO 8, which is over 10 years old, so it would likely take a long time before scores that draw on more diverse data are widely deployed.
In addition, some civil rights and consumer advocacy groups argue that the addition of alternative data would actually “reduce consumers’ control over their own data by preempting state and federal privacy protections [and] damage the credit scores of millions of consumers with a disproportionate impact on African Americans.”
Perhaps what we really need is a broader conversation about how we judge creditworthiness and how we can create new tools that account for discrimination to create a more equal and just playing field. We need to question the assumption that past behavior is a true reflection of someone’s creditworthiness.
While the industry may be (very) slowly changing for the better, unfortunately, the faulty credit scoring system we have now will continue to negatively impact the lives of millions of people for years to come. That’s why we are driven to help provide solutions and opportunities to disadvantaged consumers.
How Do Tradelines Fit Into Equal Credit Opportunity?
Having good credit often comes down to having a good start in life and knowing how to play the credit game. Some people are born with access to wealth and education while others are not. People who don’t have the resources to start building good credit early on often get stuck in the downward spiral of a broken system that leaves them little room to improve their financial situation.
When people make mistakes, as we all do sometimes, these mistakes have a much greater impact on those who lack good credit than on those who have been playing the credit game for years.
The gap between classes in society is getting larger, as opposed to our country’s ideal of promoting equality. In reality, the wealthy are the ones who receive the most help and opportunity.
Our society has become a credit-based society in which credit scores affect almost every aspect of our lives, yet there are clear “winners” and “losers” in our credit scoring system. Statistically, there are clear indications that these differences are not spread out equally across our country.
Good credit is something that many privileged Americans start out with in early adulthood because of the family they were born into. This is no secret among the wealthy.
On the other end of the spectrum, many lower-income families do not have family members with good credit that they can ask to help them build credit by adding them as an authorized user on a credit card. This option simply does not exist to many, while the banks encourage it for others.
To us, it does not seem fair that some people have this option but others do not. Tradeline Supply Company, LLC seeks to bridge this gap by helping to provide a chance at equal credit opportunity for all.
What do you think about the credit system and equal credit opportunity? If you liked this article, please share it or leave us a comment below!
What is credit piggybacking? If you’re not sure what this strange term could possibly mean, you’re definitely not alone.
Credit piggybacking, also referred to as “credit card piggybacking” or “piggybacking credit,” is a commonly used credit-building strategy. However, many people are still unaware of how to access this strategy and use it to their advantage.
In this article, we’ll define what piggybacking for credit means and how it can help your credit.
Credit Piggybacking Definition
The general definition of credit piggybacking is building credit by sharing a credit account with someone else. For example, spouses, business partners, and parents and children are all common examples of people who often share credit.
There are three main ways in which credit piggybacking can take place, which we discuss in more detail in “The Fastest Ways to Build Credit”:
Opening an account with a cosigner or guarantor is one way to piggyback on someone’s good credit.
Opening an account with a cosigner or guarantor, which is someone who promises to be responsible for the debt if the primary borrower cannot repay it. If the cosigner or guarantor has good credit, the borrower may be able to qualify for credit that they could not qualify for on their own or qualify for better terms. Opening a joint account with another person, which means both parties have full access to the account and are both held fully responsible for the account. By opening a joint account with a partner who has good credit, a person with less-than-ideal credit may be able to open an account that they wouldn’t have qualified for on their own or get more favorable terms. Becoming an authorized user for the purpose of credit card piggybacking, meaning you are not responsible for the debt, but the entire history of that account may be reflected in your credit file, regardless of when you were added to the account.
When people talk about piggybacking credit, they are usually referring to the method of piggybacking using authorized user tradelines.
How Does Authorized User Piggybacking Work?
Here’s how piggybacking works as an authorized user:
When you are added as an authorized user to someone’s credit card, often (depending on the bank), the full history of that account will then be shown in your credit report, regardless of when you were added to the card. Therefore, piggybacking can almost instantly add years of perfect payment history to the authorized user’s credit file. Authorized user tradelines can affect many important credit variables, such as your average age of accounts, age of oldest account, overall utilization ratio, number of accounts, mix of accounts, and more. Historically, only the wealthy and privileged were able to use piggybacking as a credit-building strategy. Now, there is a marketplace where tradelines can be bought and sold, which is helping to democratize the credit system and provide equal credit opportunity.
The issue of piggybacking went all the way to Congress, which upheld consumers’ rights to use authorized user tradelines.
Is Piggybacking Credit Legal?
While Tradeline Supply Company, LLC does not provide legal advice, we can provide evidence that supports the idea that piggybacking credit is legal.
Firstly, piggybacking for credit is an extremely common practice that has been in use since the advent of credit cards. Studies estimate that 20-30% of Americans who have credit records have authorized user accounts in their credit file.
In addition, about 25% of people who have credit reports initially established their credit files by piggybacking in one way or another.
Many banks actually encourage consumers to add authorized users for the express purpose of boosting their credit scores.
You may have heard about FICO trying to take away authorized user privileges in 2008. But what you probably didn’t hear about was FICO backing down after a congressional hearing that involved the Federal Trade Commission and Federal Reserve Board.
During the hearing, FICO admitted that they could not legally discriminate between spousal AUs and other users, because this would unlawfully violate the Equal Credit Opportunity Act.
Since the U.S. Congress has upheld consumers’ rights to use authorized user tradelines, it seems reasonable to conclude that authorized user tradelines are legal.
However, it is important to get your tradelines from a reputable source. Some tradeline companies use illegal credit profile numbers (also known as CPNs) to mislead creditors as well as consumers. That’s why consumers should only work with tradeline companies that don’t use or sell CPNs—learn more about CPNs and why Tradeline Supply Company, LLC does not accept them.
Does Piggybacking Credit Still Work?
As we discussed in “Do Tradelines Still Work in 2020?”, credit piggybacking still works, and we think it will be around for a long time.
Piggybacking credit is a well-established credit-building strategy that has been defended in Congress and promoted by banks. It is a significant part of our credit system.
Thanks to the Equal Opportunity Credit Act, authorized user tradelines are still a very important factor in credit scoring models.
Not only that, but even if FICO were to devise an algorithm intended to exclude piggybackers, it would be quite some time before lenders could implement it on a large scale. The slow-moving financial industry is still using FICO scores that were developed decades ago.
Piggybacking companies bring together buyers and sellers of authorized user tradelines.
What Do Piggybacking Companies Do?
Friends and family will often allow each other to piggyback, but for many people, it’s difficult to find someone with good credit to piggyback on. A third party can play a role in helping to connect people who are looking to purchase seasoned tradelines with people who have high-quality tradelines to offer.
Piggybacking companies, more commonly referred to as tradeline companies, simply facilitate the buying and selling of authorized user tradelines.
The tradeline company acts as an intermediary by marketing the tradelines to consumers, protecting the identities of the clients, and preventing fraud.
At Tradeline Supply Company, LLC, we provide an innovative platform through which users can buy and sell tradelines entirely online. We also provide educational resources so consumers can familiarize themselves with the credit system and how piggybacking works.
How Long Does Piggybacking Credit Take Before I See the Tradelines on My Credit Report?
The account you are piggybacking on can show up on your credit report in as little as 11 days, depending on several factors relating to the particular tradeline.
Each piggybacking tradeline has its own reporting cycle, and Tradeline Supply Company, LLC provides a “purchase by date” before which you must purchase your tradeline in order for us to guarantee that it will post in the coming reporting cycle. If you miss the purchase by date, it will simply show up in the following cycle.
If you have purchased a seasoned tradeline that you believe has not posted, first, check to make sure that the entire reporting period has passed, then check your credit reporting service again to verify that it still has not posted. If you take these steps and determine your tradeline has not posted, please reach out to us for support and we will rectify the situation.
Can Piggybacking Hurt Credit?
If credit piggybacking is done incorrectly, it can actually backfire and hurt your credit.
Because the full history of the credit account is reflected in the credit file of the piggybacker, that means any derogatory factors will show up, too.
For example, if the account has any late or missed payments, that could hurt the authorized user rather than help. Similarly, a high utilization ratio on the account could also damage the authorized user’s credit.
That’s why we recommend going with a reputable piggybacking company who guarantees a perfect payment history and a low utilization ratio (15% or lower) on all tradelines. This will virtually eliminate the risk of your credit being hurt by these factors.
The only other way piggybacking could hurt your credit is if you choose the wrong piggybacking credit card. It’s essential to choose the right tradelines for your credit file. To do this, you’ll need to figure out your average age of accounts and how adding a tradeline could affect this statistic.
For example, if your average age of accounts is five years and you decide to piggyback on a tradeline that is two years old, this would bring down your average age of accounts, which is the opposite of what you want to achieve with tradelines.
Buying authorized user tradelines is an investment in your financial future. Make sure you are getting the most out of your tradelines by asking yourself the following questions first.
1. What is my average age of accounts?
Age is one of the most important factors in your credit history, so it is important to understand what your own average age of accounts is and how that metric could be impacting your credit. It will also play a role in determining which tradelines you should add to your account.
Calculating your average age of accounts is easy. Just add together the ages of all of your revolving accounts (e.g. credit cards) and divide this total by the number of accounts.
For example, let’s say we have four accounts and their ages are 2 years, 4 years, 5.5 years, and 6 months. Here’s how we calculate the average age of accounts: 2 years + 4 years + 5.5 years + 0.5 years = 12 years / 4 accounts = 3 years average age of accounts.
You don’t even have to do the math yourself if you use our Tradeline Calculator. Just put your information into the calculator and let it do the work for you.
Use our tradeline calculator to find your average age of accounts and utilization ratios.
Not sure how old your accounts are? You can pull your own credit report for free (without hurting your score) on websites like Credit Karma.
2. What is my utilization ratio?
Your utilization ratio, or the ratio of the debt you owe to the total credit limit of all your revolving accounts, is another important influence on your credit score to be aware of. Your utilization contributes about 30% of your credit score, so high utilization can drag down credit, even after tradelines are added. Therefore, it’s important to calculate your utilization ratio before buying tradelines.
Here’s how to do it: add up all of the debts you owe on your revolving accounts and then add up all of the credit limits of each of your revolving accounts. Take the total amount that you owe and divide it by your total credit limit to get your ratio.
If you’re not a big fan of math, you can check your utilization ratio and find out how adding new tradelines might affect it using our Tradeline Calculator.
If you have credit cards with high utilization, paying down the balances might be a good investment.
3. Do I have any credit cards with high utilization that should be paid off?
Even if your overall utilization is relatively low, individual credit cards with high utilization can still hurt your credit. Adding a tradeline can affect your overall utilization as described above, but will not solve the problem of having one or more cards with high utilization individually.
If you can easily pay down your balances to get the utilization to be 20% or lower, that would be money well spent, because you are lowering your utilization ratios to a level that is considered to be better for your credit.
On the other hand, if the amount that you owe is quite large and you are not in a position to significantly lower your utilization right away, then perhaps getting a couple of high limit tradelines may be the easier route to go.
Either way, utilization ratios are very important and should be taken into consideration when buying tradelines.
A credit freeze or fraud alert will prevent new tradelines from posting to your credit report.
4. Do I have a credit freeze or fraud alert on my credit report?
A credit freeze or fraud alert will block access your credit file, which prevents any new information from being added to your credit report. Therefore, if you have placed a credit freeze or fraud alert on your credit file, new tradelines will not post.
Be sure to check whether you have a fraud alert or credit freeze before purchasing a tradeline and contact the credit bureaus to remove it if necessary.
5. What is my priority: age or credit limit?
While the length of credit history only makes up about 15% of a score, age also goes hand-in-hand with payment history, which is the most valuable factor in credit scoring. The more age an account has, the more time it has had to accumulate a positive or negative payment history.
All of our tradelines have a perfect payment history, and together, age and payment history make up 50% of a credit score. Therefore, we believe it is better to prioritize age in most circumstances.
However, there are some cases in which people choose to prioritize the credit limit of a tradeline over its age. Be sure to carefully consider your personal situation and what is most important to you.
6. What are the credit limits of the AU tradelines?
If you are buying tradelines from a reputable business, the tradelines should all be from reliable banks, have perfect payment histories, and have low utilization. Since these factors are going to be about the same for each card, the two main things to consider when choosing tradelines are age and credit limit.
The credit limit factor is important because it can affect your overall utilization ratio. While individual cards with high utilization can still have a negative impact on your credit, getting your overall utilization as low as possible can still be very beneficial.
Additionally, depending on your goals, the credit limit can be an important factor if you are trying to establish a history of higher-limit accounts in your credit file.
7. How old are the tradelines?
As we stated previously, the age of a tradeline is extremely valuable, and in most cases, it is more important than the credit limit. This is because a seasoned tradeline will contribute not only to your length of credit history but also add a long period of a perfect payment record.
As we said earlier, these two categories together make up half of your score, far outweighing the other categories. Therefore, a good general rule of thumb is to buy the oldest tradelines your budget allows for.
Another reason you want to go for older tradelines is that tradelines that do not have sufficient age can actually hurt your score by decreasing your average age of accounts.
If your average age of accounts is 3 years, for example, your tradeline should be a minimum of 4 years old, but ideally much higher than that if the goal is to see a significant difference. If you buy a tradeline that is only 2 years old, your average age of accounts will decrease, which could damage your credit score. This is why it’s critical to do the calculations using our Tradeline Calculator before making a purchase.
To determine which tradelines to buy, you will need to think about age as well as the credit limit. Photo via Hloom.com.
8. Which tradelines should I buy? How do I choose the right tradelines?
Once you have determined what your priorities are, you will be better prepared to choose the right tradelines for you. If you want to increase your average age of accounts or extend the age of your oldest account, go for the older tradelines.
If you are more focused on credit limit or your overall utilization ratio, check out our higher-limit tradelines.
You can view the tradelines we have available and sort the list by age and credit limit on our updated tradeline list. For more guidance on choosing the best tradelines, read our buyer’s guide to tradelines.
9. Do the tradelines have perfect payment histories?
Payment history makes up 35% of a credit score, making it the most important component. It is crucial that any tradelines you add have a perfect payment history, because even one missed payment can do serious damage to your credit. All of our tradelines are guaranteed to have a spotless payment history.
10. Are the tradelines substantially better than what I already have in my file?
Obviously, a tradeline will only be effective for you if it is superior to the other tradelines that are already in your credit file. The safest bet is to look for one that is significantly higher in age and/or credit limit than the accounts that you already have in order to affect your averages as much as possible.
Keep in mind the reporting date and the purchase by date when buying tradelines.
It is difficult to affect an average, especially when there are already several accounts in your credit file, so adding a tradeline that is only marginally better than your existing tradelines may not have the desired effect. Make sure to invest in a high-quality tradeline that has real potential for results rather than just adding more of what you already have.
11. When is the reporting period and when is the purchase by date?
The reporting period of a tradeline is when the bank reports the tradeline to the credit bureaus, which is usually around the same time each billing cycle, with some fluctuation. You should see any new tradelines you purchased on your credit report once their respective reporting periods have passed.
Since processing payments and adding authorized users takes time, there is a “purchase by” date that tradelines must be purchased before if you want them to report in the upcoming reporting period. You can still purchase tradelines after their purchase by date, but keep in mind that they may not post until the next reporting period.
Our tradeline list provides the reporting period and the corresponding purchase by date for each of our tradelines. Be sure to keep these dates in mind when making your purchase.
12. Which banks are the tradelines from?
The bank that the tradeline is from is important because many banks do not accurately report authorized user data to the credit bureaus. The tradeline needs to come from a bank that has proven to report AU data reliably in order to be sure the tradeline has the best chance of posting.
With Tradeline Supply Company, LLC, you do not have to worry about choosing the right banks, because all of the banks we work with have been proven to report reliably to all three major credit bureaus.
However, there is one exception: if you have any outstanding collections or if you have filed bankruptcy with a certain bank, this can prevent your tradelines from posting successfully, so you will want to avoid purchasing tradelines from that bank.
Depending on your situation, you may need multiple tradelines, but in other situations, just one may be enough.
13. How many tradelines do I need?
Since everyone’s credit file is complex and unique to their situation, it can be difficult to know whether it is best to buy multiple tradelines or one very high-quality tradeline. If there are budget constraints, it is usually most effective to purchase one premium tradeline rather than multiple tradelines that are less powerful.
However, there are other situations in which multiple tradelines might be a better choice.
Just remember that the power of tradelines is always going to be relative to your current credit file. If you are not sure how many tradelines you may need, our article, “Buying Tradelines: How Many Tradelines Do I Need?” can help guide your decision.
14. Does the tradeline company use address merging or work with CPNs?
Watch out for companies engaging in address merging or other types of fraud.
Many tradeline companies tell their customers to claim the same address as the primary account holders of the tradelines, even though they do not live there, in order to increase the likelihood of the tradelines posting. Essentially, they are asking their customers to commit fraud and lie about their address.
This illegal tactic is commonly known as “address merging.” If a tradeline company does address merging, all parties involved could be implicated in fraud, so savvy authorized users will want to avoid these unscrupulous companies.
Similarly, companies often sell tradelines for “credit profile numbers” or “credit privacy numbers,” known as CPNs. We have written at length about the dangers of CPNs, but to summarize, using a CPN instead of your real social security number to apply for credit is identity fraud and a felony offense.
Beyond that, so-called CPNs are often SSNs stolen from other people, especially children, which means these companies are involved not only in fraud but also identity theft.
Clearly, a company that is committing fraud by merging addresses or working with CPNs is not one you want to do business with.
15. Do I trust the company providing the tradelines?
The most important part of the process of buying tradelines is being able to trust the company you are working with. After all, you want to be sure you won’t get stuck with tradelines that are low-quality, are overpriced, or don’t post well. Plus, you want to be certain your tradeline company provides secure online transactions and takes extensive measures to prevent fraud. Watch out for unethical and unprofessional tradeline companies, and make sure to choose one that you trust and that will treat you with integrity and respect.
15. When will my tradelines post?
Make sure to choose a tradeline company that acts with integrity.
Some tradeline companies say that it could take up to 60 days for your tradelines to report. If you don’t want to wait two months for your tradelines to show up on your credit file, we can get tradelines to post in as few as 11 days, and sometimes even sooner than that.
15. How long will I stay on the tradeline?
Some tradeline companies only keep AUs on their tradelines for a single reporting cycle. This doesn’t give you very much time to accomplish your goals.
Generally, it’s best if you can stay on the tradeline for at least two reporting cycles, which should allow you enough time to accomplish your goals. If you think you might need additional time on the tradeline, ask whether the company offers extensions.
Check what the company’s policy is, and remember that if their standard is just one cycle, keep in mind that you’d have to double the price in order to be on par with companies that keep AUs on for two reporting cycles.
16. What steps can I take to ensure that my tradelines have the best chance of posting?
To minimize the chances of a non-posting occurring, make sure to take the following steps:
Remove all fraud alerts, credit freezes, and credit locks from your credit report, since these block new information from being added to your credit file and therefore prevent tradelines from posting. Purchase your tradeline no later than the purchase by date shown on our tradeline list. Consider buying multiple tradelines as a precautionary measure to hedge against potential non-postings. Only buy tradelines from companies that have high posting success rates and a money-back posting guarantee. Do not buy tradelines from banks that you have outstanding collection accounts with or have declared bankruptcy with, since you may be blacklisted from working with that bank again. Use the correct address that you have on file with the credit bureaus so that your identity can be cross-verified with your credit file. Do not work with companies that conduct “address merging,” which is a form of fraud. Double-check your order and payment information for accuracy. Typos in your personal information can cause a non-posting and incorrect bank account information can delay payment processing and therefore can delay the tradeline from posting.
We’ve written before about the problem of credit invisibility, which is when a consumer does not have a credit score. Millions of consumers are credit invisible in the United States, which represents a serious obstacle in the path to financial success in a society where credit is interwoven with so many aspects of our lives. You yourself may even be credit invisible and looking for a way to become credit visible by gaining credit history.
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