Credit Tradelines
There are several ways to boost, repair or simply improve the overall quality of your credit score. More traditional means include taking out small personal loans and paying them back over time. Also, you can take out a secured credit card and slowly repair your credit if you have a lower credit score.
However, the issue with these is that if you have a damaged or low credit score, it can be difficult to obtain a credit card or installment loan. An effective way to boost your credit score and make obtaining a loan easier is utilizing a credit tradeline.
A credit tradeline allows you to become an authorized user on a line of credit, giving you the ability to reap the benefits of that line of credit. With that comes a variety of options and we’ll go into greater detail on how a tradeline works.
How it Works
As stated, using a tradeline will allow you to become an authorized user on an established line of credit. What that means for you is when that credit card reports to the credit bureaus, your name will be associated with that line of credit and the full history of the tradeline will show on your report.
However, when you are an authorized user for the purpose of improving your credit, you do not have access to that line of credit, you do not have the ability to alter any information and you will not see whose line of credit it is. You simply reap the benefits of a well-established, healthy line of credit.
Age of Credit
When searching for the right tradeline, you will notice there are lines of credit that have been around for a year, all the way up to several decades. The age of the line of credit will dictate the premium you pay for that tradeline, as well as how it will boost your credit score.
An aged line of credit will benefit your score by adding payment and age history, and will show lenders you can maintain debt and use it in a responsible manner.
Size of Credit
The other part of the credit tradeline to consider is the size of the credit limit. If you go for a tradeline with a higher line of credit and small balance, your credit utilization can be lowered greatly. Same can be said for a smaller line of credit, it simply depends on your current credit situation.
For example, if you have $10,000 worth of credit and you are using $9,000 of it, you have a 90% utilization rate. However, if you add a credit line with a line of credit of $20,000 and zero balance, you are now reporting $30,000 worth of credit, utilizing $9,000 worth, thus lowering your percentage to 30%.
With these three details, you’ll be able to find the right tradeline for you. Keep in mind, the more established a line of credit, combined with a higher limit, the greater premium you’ll pay. By paying that higher premium you’ll likely see a spike to your credit score.
