Viewing entries tagged
credit-repair-expert

Why You Should Never Pay to "Rent" a Tradeline

Comment

Why You Should Never Pay to "Rent" a Tradeline

The desire to earn better credit is not only understandable, it is also incredibly smart. The condition of your credit will have a big influence over your financial life. Want to purchase a home or vehicle? Your 3 credit reports and scores play a big role in your ability to qualify for a loan and help determine the rate you will be offered if you are approved. Applying for a new job or promotion? Your credit reports might play a role again. In fact, the condition of your credit could be considered whenever you take out insurance coverage, open a new mobile phone account, and in many more situations than you probably ever believed possible.

Hopefully you already understand the importance of earning good credit and you are working to try to repair the damage from any past credit problems you may have encountered. Yet the truth is that the road back to healthier credit is not always a quick journey. You can certainly do things to help speed the process along such as establishing new, positive accounts and perhaps working with a reputable credit repair professional. Even so, it may require a little patience and discipline on your part before you can expect to earn good credit again.

Tradeline Rentals

Because credit is so important and because improving your credit can sometimes be a slow and tedious process (especially if you are working to repair your credit on your own), you may find yourself tempted to take a few shortcuts along the way. The temptation is understandable, but taking shortcuts to try to improve your credit can actually be quite dangerous. One such shortcut which you should avoid at all costs is known as tradeline renting.

There is no question that being added onto someone else's credit card account as an authorized user has the potential to help your credit scores. If a loved one adds you onto an existing, well managed credit card account (no late payments, low or $0 balance) the impact upon your personal credit scores might be very positive once the account shows up on your credit reports. If the account has been opened for a while (aka it is "seasoned") and if the credit limit on the account is high then the positive credit score impact may be even more significant.

There is certainly nothing wrong with being added as an authorized user onto a credit card belonging to a friend or family member. As already mentioned, the authorized user strategy can potentially be a very effective step toward building or rebuilding your credit. If you are considering gaming the system by renting or "piggyback" on a stranger's credit card account as an authorized user, however, you could possibly find yourself in hot water, legally speaking.

The tradeline renting scam comes in a few different flavors. Typically it is a service which is facilitated by a broker or a middle man who, for a sizeable fee, will connect you with a stranger who has older or seasoned credit card accounts which are in good standing. Once you pay your fee, the stranger adds you onto their credit card account as an authorized user. The middle man pays the stranger with good credit a small portion of the fee collected from you and then puts the remainder in his own pocket.

It is arguable whether or not the practice itself of paying a stranger to add you as an authorized user is illegal. However, if you apply for any new loans after paying to be added to a stranger's credit card account then there is no question that you could run the risk of being charged with bank fraud. Plus if you applied for your new loan over the phone or via mail, you may risk being charged with mail fraud or wire fraud as well.

Additionally, FICO's newer credit scoring systems have logic designed to detect piggybacking scams. As a result, even if you pay to be added onto a stranger's account, you might receive no benefit from the tradeline whenever a lender pulls your credit scores. With so many legitimate means of repairing poor credit, it simply is not worth the risk of renting a tradeline in an attempt to speed up the process.

CLICK HERE to schedule a no-obligation credit analysis with a HOPE4USA credit expert and discover legitimate ways to work toward repairing your credit problems.





credit-expert-michelle-black

Michelle Black is an author and a credit expert with nearly 2 decades of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars on various credit and financial topics. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft.


Comment

Will Increasing a Credit Limit Help Your Credit Scores? 

Comment

Will Increasing a Credit Limit Help Your Credit Scores? 

When it comes to improving your credit, there are a lot of different strategies which can help you to reach your goals. Of course, paying your bills on time, every time is the first place you should start. You can also work with a credit repair professional to help try to clean up inaccurate and unverifiable information off your credit reports. You may be able to pay down credit card debt to bring about a positive credit score increase as well. However, there are also some lesser known credit improvement strategies which might surprise you.  

How Will a Credit Limit Increase Impact Your Credit Scores?

If you are approved for a credit limit increase, the higher limit will often have a positive impact upon your credit scores. However, this is not always the case. Determining whether or not a credit limit increase is likely to increase your credit scores is going to depend upon a variety of factors. Let's walk through them together.  

1. Will a credit limit increase lower your revolving utilization ratio?

Credit scoring models like FICO and VantageScore are built so that they pay a lot of attention to the relationship between your reported credit card balances and your account limits. This relationship is known as your revolving utilization ratio. Here is a quick example to show how revolving utilization is calculated:

  • Original Credit Limit: $5,000

  • Account Balance on Credit Report: $1,000

  • Revolving Utilization Ratio: $1,000 (Balance) ÷ $5,000 (Limit) = 0.20 X 100 = 20%

The lower your revolving utilization falls, the better the impact is for your credit scores. Naturally, paying off your credit card balances is probably the best way to achieve a lower revolving utilization ratio. However, if you cannot afford to pay down your credit card debt sufficiently, a credit limit increase might lower your revolving utilization as well. Here's how it works:

  • Increased Credit Limit: $10,000

  • Account Balance on Credit Report: $1,000

  • Revolving Utilization Ratio: $1,000 (Balance) ÷ $10,000 (Limit) = 0.10 X 100 = 10%

As you can see in the example above, the revolving utilization ratio was cut in half simply by increasing the credit limit on the account. This would be very likely to have a positive credit score impact.

2. Can a credit limit increase hurt your credit scores?

Generally a credit limit increase will not harm your credit scores. However, if your credit card issuer wants to check your credit report in order to review your request for a limit increase (a common requirement) then a hard inquiry would be added to your credit file. If your request for a limit increase is denied (typically due to credit problems), then you will have undergone a hard inquiry with no upside.

Hard inquiries have the potential to damage your credit scores. Of course, you should keep in mind that not every hard inquiry automatically has a damaging effect upon your credit scores and, even when they do, the impact is typically minor. If your request for a credit limit increase is approved and the result is a lower aggregate revolving utilization ratio, the overall result for your credit scores will still probably be positive in spite of the new inquiry.

Managing Your New Credit Limit Increase

It is important to remember that while a well-managed credit card account can potentially be great for your credit scores, credit card debt is another story. Credit card debt can be both expensive and can damage your credit scores, even if you make all of your monthly payments on time. If you request a credit limit increase as a strategy to help boost your credit scores, you will have to be extra vigilant and commit to not charge up additional debt. Otherwise, or you could find yourself in a difficult situation to manage in the not-so-distant future.  





credit-expert-michelle-black

Michelle Black is an author and a credit expert with nearly 2 decades of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars on various credit and financial topics. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft.


Comment