Is your credit score costing you money or saving you money? One recent report says that your credit score can cost you more than $45,000 if you have a poor one.
When you equate your credit score to dollars and cents, you begin to realize just how important it is. It determines your ability to get a business loan and how much interest you pay. A great one can save you just as much money.
You can improve your credit score when you buy tradelines. Don’t know what tradelines are and how they can give you a better score?
Read on to learn more about tradelines and how you can improve your credit score when you buy them.
Credit Report vs. Credit Score
In order to understand how tradelines impact your credit score, you need to know how your score is calculated.
Where most people get confused is that they don’t understand the difference between your credit report and your credit score. They’re related but very different.
Your credit report is comprised of information that is collected by credit bureaus. There are a number of credit bureaus in existence, but only three that tend to influence your ability to get a loan approved.
Those three are TransUnion, Equifax, and Experian. They gather information about your personal history like addresses, names you’ve used, and your social security number.
Under your personal information, you’ll see the accounts that you’ve opened throughout your adult life. You’ll also see accounts where you’re listed as an authorized user. Authorized user means that you are the primary person who opened the account, or you are able to use the card or you have a joint account.
These can be credit cards, revolving lines of credit, auto loans, mortgages, or personal loans.
These accounts will show the status of the account (open, closed, in collections), your payment history, the balance, and how much credit you have available.
Each account listed is called a tradeline. The information contained in each tradeline has a direct impact on your credit score.
Your Credit Score
Believe it or not, the credit bureaus calculate credit scores, but that’s not what is used by lenders when they check your score.
There are different companies that calculate scores. The most popular one is by the Fair Isaac Corporation. That is the company that offers the FICO score to lenders.
Another up and coming credit score VantageScore. This is where the credit industry gets interesting because the VantageScore is a direct competitor to FICO. It was created by TransUnion, Equifax, and Experian. There have been several versions of VantageScore, the latest being VantageScore 4.0.
There are differences in how each scoring model calculates your credit score. The good news is that they take the same information from your credit report. They just apply the percentages that make up your score in a different way.
For example, the credit utilization rate (credit available vs. credit used) can be weighed more heavily on your FICO score than your VantageScore.
The big things that you have to look at are your payment history, credit utilization rate, and the types of accounts you have open.
What Happens to Your Credit Score When You Buy Tradelines?
You can add tradelines to your credit score by opening up more accounts or being added as an authorized user on accounts.
If you open up more accounts, you’ll have a hard credit check on each account you applied for. Not only that, but you run the risk of taking a hit on your credit and getting denied.
You could be added to someone else’s credit card, but you may put a personal relationship in jeopardy.
You can buy tradelines, which limits your risks and you can get the benefits of improving your credit score. Here’s how buying tradelines can improve your score.
Credit scoring agencies like to see different types of tradelines on your report. If you just have one type of credit, like a personal loan, it can drag your score down.
You can use tradelines to create a better credit mix, which can help you improve your credit score.
Better Payment History
Do you have a spotty payment history? It would take years to recover from a bad payment history. When you buy tradelines, you can add several spotless payment histories to your credit report.
That will instantly improve your payment history and increase your score.
Lower Credit Utilization Rate
The biggest impact that more tradelines can have on your credit score is your credit utilization rate. The rate is a ratio of how much credit you have and how much you use.
For example, let’s say that you have $30,000 in credit limits. You have outstanding balances totaling $20,000. Your credit utilization is 66%.
It’s weighted very heavily to calculate your credit score. Maxing out your cards can be seen as a sign of financial hardship and you’re relying n credit to get you through. Lenders will take this information and determine that you won’t be able to pay back your loan.
You generally want to see your rate at 30% or lower. When you add a tradeline that has a $10,000 limit and $0 balance, your credit utilization rate drops from 66% to 50%. That will bump up your credit score.
Buy Tradelines for Better Credit
Your credit score is so important to your financial health. It also impacts your business as it can limit the amount of capital you can get when you start your business.
The best thing you can do is improve your score. You can do that when you buy tradelines and add them to your credit report. These tradelines are used to calculate your score and you can raise your score quicker than paying down debt for years.
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