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 Repair Tool Kit

Get your copy for FREE today!

---

Credit Reports

Knowing exactly what is on your credit reports and where your credit scores fall currently is the first step for anyone looking to build healthy credit.

---

Free Resources

We’ve got you covered!

---

The Cost of Bad Credit

Credit Cards

Compare the credit card offers below to determine which cards are right for you.

---

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.

---

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 Reports

Knowing exactly what is on your credit reports and where your credit scores fall currently is the first step for anyone looking to build healthy credit.

---

Credit Repair Tool Kit

Get your copy for FREE today!

---

Fix Your Credit, Fix Your Life

Your first step towards the credit you deserve!

---

Credit Cards

Compare the credit card offers below to determine which cards are right for you.

---

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.

---

Where Do Credit Scores Come From?

Credit scores can affect your life in many important ways. First, anytime you apply for a mortgage, car loan, credit card, or financing of any kind, your credit score will typically be looked at to determine whether you are approved or denied for your financing application. If you are approved, your credit scores are looked at again to determine the type of interest rate and terms you will be offered. Credit scores are often the #1 factor considered whenever you apply for a loan.

Since credit scores are generally the first key to loan approval, it is important to understand where your credit scores come from and how they are calculated. There are 3 major credit bureaus in the United States: Equifax, TransUnion, and Experian. If a lender were to pull your credit report and score from each of the 3 bureaus, all 3 of those scores would likely be at least a little different.

There is more than one type of credit score available as well. In fact, there are hundreds. Currently, the type of credit score brand which is most commonly used by lenders is the FICO Score (though VantageScore continues to gain ground in the marketplace).

FICO Scores range from 300 - 850 with higher credit scores indicating less credit risk. The following chart shows the basic makeup of how your FICO credit scores are calculated:

Payment History, which considers factors pertaining to how you have managed your credit obligations both currently and in the past, accounts for 35% of your FICO Scores. This category can also be described as "the presence or absence of derogatory information."

If you have a history of making late payments on your financial obligations, your credit score will almost certainly be on the lower end of the spectrum. It may sound crazy, but some late payments could potentially damage your credit scores more than any other factor on a credit report including bankruptcy, foreclosure, or repossession (especially if the late payment is severe, recent, and if the account is currently past due).

Amounts Owed accounts for 30% of your FICO Scores. The primary factor considered within this category is your revolving utilization ratio. FICO's scoring models will consider the amount of credit card debt (aka balances) on your credit report and will compare it to your available credit limits. This higher your debt to limit ratio climbs on your reports, the worse the impact will be upon your scores.

Here is an example of how revolving utilization is calculated. If you have a credit card with a $500 limit and your credit report shows a $500 balance on the account, your utilization ratio is 100%. At 100% utilization your credit scores are practically guaranteed to be impacted negatively. However, keep that same credit card account paid off and your credit scores will almost certainly receive a boost. High credit card balances can significantly lower your credit scores, even if you pay every single monthly payment on time.

Length of Credit History makes up 15% of your FICO Scores. FICO considers the average age of your credit lines as well as the age of your oldest account to determine how many points will be awarded to your credit score for this category.

The older the accounts appearing on your credit reports, the better. Merely opening a new account can potentially lower your credit scores, even if you have never missed a payment on the account – so proceed with caution when applying for new credit. You do not have to be afraid to open new credit; however, you should probably develop the habit of only opening new credit when really necessary.

New Credit makes up 10% of your FICO Scores. One of the primary factors considered within this category is how often you apply for new accounts.  Every time your credit report is pulled as part of an application for financing a record of the pull, known as a "hard inquiry," is added to your credit report(s).

Hard inquiries have the potential to impact your credit scores negatively. However, a “soft inquiry” of your credit report (such as requesting a copy of your own personal credit report) does not hurt your credit score at all.  If you have not reviewed your credit reports in a while, you are entitled to a free copy of all 3 of your reports every 12 months from www.annualcreditreport.com. Checking your reports at least several times a year for errors is highly recommended.

Types of Credit Used accounts for the final 10% of your FICO Scores. To maximize your scores in this category it is important to have the right mixture of account types on your credit reports. FICO rewards consumers who show that they have experience managing a variety of account types (i.e. mortgage accounts, revolving accounts, installment accounts, student loans, etc.). The more diverse the accounts on your credit reports the better your scores will fare.

Have specific questions about your credit reports? Our caring credit experts are here to help. Please contact us via email or call 704-499-9696. We would love to hear from you!

Don't forget to follow us on Facebook and Twitter!

---

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. .

---

Credit Cards

Compare the credit card offers below to determine which cards are right for you.

---

Credit Repair Tool Kit

Get your copy for FREE today!

---

Fix Your Credit, Fix Your Life

Your first step towards the credit you deserve!

---

Credit Reports

Knowing exactly what is on your credit reports and where your credit scores fall currently is the first step for anyone looking to build healthy credit.

---

The Cost of Bad Credit

---

Free Resources

We’ve got you covered!

Credit Scams You Should Avoid

Poor credit can lead to a lot of painful and embarrassing moments. If you are currently struggling with credit problems then you already know just how miserable bad credit can be. Credit problems can make it difficult to secure a place to live, to finance a vehicle, to qualify for a credit card or loan, and even to do something as simple as opening a new utility account without a sizable deposit.

Unfortunately, scammers are very aware that bad credit makes life hard too. They know that many consumers are absolutely desperate to change their credit situations and they eagerly try to prey upon this desperation. Thankfully, you can help to protect yourself from these con artists by learning a little more about some of the most common credit scams you need to avoid.

The New Credit Identity Scam

One of the most popular credit scams involves the practice of paying someone to create a "new" credit identity for you. On the surface, it is understandable why the idea of a fresh start might sound attractive to you. Unfortunately, what a scammer will not tell you is that by using a "new" identity you could actually be guilty of committing a number of different crimes.

The new credit identity scam, also known as file segregation, typically involves a few steps. First a fraudulent company, likely pretending to be a credit repair outfit, will offer to sell you a new credit identity number (typically an EIN number or a CPN number) which you can use in place of your social security number on future credit applications. By using this alternative number you will be creating a separate or segregated credit file with each of the credit bureaus which will supposedly replace your old, damaged credit files. Yet not only is this file segregation scheme typically illegal, it can also be expensive and ineffective.

Fees for new credit identity services often run into the thousands of dollars, although the scammer will probably try to argue that the fee is a small price to pay for an instant fix to all of your credit woes. Be careful not to be fooled by such tactics.

Additionally, when you use an EIN or CPN number in place of your social security number on a credit application you are likely guilty of bank fraud. If you submitted a fraudulent application over the phone, online, or via mail then you might be guilty of wire fraud or mail fraud as well. Furthermore, that EIN or CPN number you thought you were purchasing could actually be a real social security number which has been stolen from someone else. (Are you really surprised that your friendly neighborhood scammer might be an identity thief as well?) If you use someone else's social security number on a credit application then you might just be guilty of committing identity theft yourself.

The Tradeline Rental Scam

Piggybacking is a term which refers to the process of being added to someone else's existing credit card account as an authorized user. Becoming an authorized user on someone else's credit card account can sometimes be a wise part of your overall credit improvement strategy. If you are added onto an older, well managed credit card account it certainly has the potential to help improve your credit scores when (and if) that positive account shows up on your credit reports. However, the authorized user strategy is only really safe and effective when done with someone whom you know personally.

Tradeline renting describes the process of paying to piggyback on a stranger's credit card account in an attempt to trick the credit scoring system. Typically you pay a middle man (most likely a sizable fee) who will then act as an agent to connect you with someone who is willing to add you onto their account as an authorized user. The bad news if you fall for the tradeline renting scam is that you could be guilty of bank fraud and a number of other associated crimes as well. To add insult to injury, newer versions of FICO's credit scoring models have been designed with logic that helps to detect fraudulent tradeline renting. So, not only can tradeline renting be expensive and illegal, there is a chance that it might not even work. 

Legitimate Credit Help

Although you should be careful not to fall for credit scams, the good news is that there are legitimate credit repair professionals who may be able to help you with your credit problems. Remember, a trustworthy credit repair company will never ask you to change your identity, rent a tradeline from a stranger, or to pay upfront fees for services.

CLICK HERE or call 704-499-9696 to schedule a no-obligation credit analysis with a HOPE4USA credit expert today.

Credit Repair Tool Kit

Get your copy for FREE today!

---

Fix Your Credit, Fix Your Life

Your first step towards the credit you deserve!

---

The Cost of Bad Credit

---

Free Resources

We’ve got you covered!

---

Credit Reports

Knowing exactly what is on your credit reports and where your credit scores fall currently is the first step for anyone looking to build healthy credit.

---

Michelle Black is an author and leading credit expert with a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

---

The Newest Credit Scoring Model: VantageScore 4.0

To many people, FICO is king when it comes to credit scoring models. The majority of lenders, most notably those in the mortgage industry, rely either exclusively or at least heavily upon FICO scores as they evaluate the credit worthiness of new applicants for financing. However, with the introduction of VantageScore 4.0 in the fall of 2017 many lenders are starting to pay a bit more attention to this newest arrival to the world of credit scoring.

In truth, VantageScore Solutions (the company which creates and sells VantageScore credit scores) is not so new. It is only new when compared with the Fair Isaac Corporation (FICO). VantageScore Solutions, founded by the 3 major credit reporting agencies themselves in 2006, is actually over a decade old. 

Yet most lenders still prefer FICO scores. FICO was initially founded in 1956 and created its first credit scoring system in 1958. The credit bureaus themselves began to adopt FICO credit bureau risk scores between 1981 (Equifax) and 1991. According to FICO its scores are currently used by 95% of the largest financial institutions in the country.

VantageScore 4.0

Though the company is already dominate in direct-to-consumer credit score sales, VantageScore Solutions has been fighting for over a decade to dip further and further into FICO's lender-purchased credit score market share. This goal is achieved by convincing more and more lenders to purchase VantageScore's credit scores to use for risk analysis in prospecting, account management, and application reviews. The roll out of the 4th generation of its scoring model in the fall of 2017 will be just one more step toward this goal, but might be better described as a giant leap instead of a step.

The reason the release of VantageScore 4.0 is such big news is because it will be the first credit scoring model to consider trended data in the calculation of consumer credit scores.  Trended data, added to credit reports several years ago, allows credit card issuers to report a 24 month history of historical balances and payment amounts made by their customers. This historical data can show future lenders whether you are truly someone who pays off your credit card balances in full each month (aka a transactor) or whether you are in the habit of revolving an outstanding balance from one month to the next (aka a revolver).

Revolvers, especially minimum payers (consumers who only pay the minimum payment due on their credit card bills) represent a higher level of risk to lenders. In fact, according to a study conducted by Experian, minimum payers are 6 times more likely to have a future delinquency than transactors. TransUnion's study on trended data found that revolvers represent between 3 to 5 times more risk than transactors.

Including trended data in VantageScore 4.0 gives this new scoring model increased predictive power over previous generations of VantageScore and, arguably, FICO scoring models as well. In other words, this new scoring model is being touted as a more reliable way to predict credit risk. Predicting risk, after all, is why lenders purchase credit scores in the first place.

Advice for Consumers

Because of recent changes in credit reporting, especially the upcoming removal of many tax liens and judgments from credit reports and the removal of many medical collections as well, lenders and credit score developers are going to begin paying more attention to alternative credit data which is also predictive. It has always been important to pay off your credit card balances in full each month both from a credit scoring perspective and also from a financial perspective as well. However, with the consideration of trended data now in the works the importance of paying off your credit card balances has multiplied exponentially.

Of course implementing a new credit scoring model is very expensive for lenders. Due to the high cost it will likely be years before a majority of lenders begin using VantageScore 4.0. The same can be assumed for any yet unannounced but potentially forthcoming new releases from FICO which consider trended data for that matter.

As a result consumers do not necessarily have to worry about trended data impacting their credit scores for a while. Still, remember that when credit scoring models which consider trended data are finally adopted by lenders those models will be looking back at a 24 month history of your credit card payments. This means that the time to develop the habit of paying off your credit card balances monthly is now.

Credit Repair Tool Kit

Get your copy for FREE today!

---

Credit Reports

Knowing exactly what is on your credit reports and where your credit scores fall currently is the first step for anyone looking to build healthy credit.

---

Fix Your Credit, Fix Your Life

Your first step towards the credit you deserve!

---

Free Resources

We’ve got you covered!

---

Michelle Black is an author and leading credit expert with over a decade and a half of experience, a recognized credit expert on talk shows and podcasts nationwide, and a regularly featured speaker at seminars across the country. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE4USA Facebook page by clicking here.

---