Tradelines, anyone? If you’re like most people, you’ve probably never heard of them, even though you have them. In conventional finance terms, “tradelines” is synonymous with “accounts” which appear on your credit report. More colloquially, tradelines is a concept through which a person is added as authorized user to a revolving (credit card) account in good standing, where the authorized user’s credit score is positively affected by inheriting the positive payment history associated with that account.
As you know, this website’s philosophy is: “Earning more, Saving more, Investing more, Living more, Reaching whatever goals you set to achieve…” As such, this post will show you how to capitalize on the tradeline concept in order to achieve stay true to the “Reach Financial Independence” philosophy.
Debt is bad, but let’s make the best of it to get out of it.
Becoming debt free may be the goal, leveraging debt is sometimes useful and some debt is unavoidable. For example, perhaps your company requires purchasing trucks, buying commercial properties, etc. Or, perhaps you don’t have the cash to purchase your homestead property. Indeed, some borrowing is unavoidable. As Thomas Sowell once observed: “There are no solutions to problems, there are only tradeoffs.” So, if forms of debt are unavoidable, we want to make the best of those situations, such as lowering our interest rates. In that case, adding tradelines can make a mountain of difference. In fact, nearly 80% of credit reports contain errors and 1 and five people are misclassified into subprime markets due to those errors. So, statistically speaking, you’re likely at a disadvantage right out of the gate. Adding tradelines to your credit report can help increase your credit score and decrease your interest rates on loans that are unavoidable. There are ancillary – but equally important – benefits as well. For example, increased credit scores can help you lower insurance rates and increase job opportunities. Each of those examples results in more money in your pocket.
Earning money from tradelines?
If you are among those with excellent credit, this market also provides an opportunity to earn money. This might sound alarming, but it has become a mainstream practice. A primary account holder (you, if you have a credit card in good standing) can earn money by adding others as an authorized user to that account. The users to not have access to the account and you terminate their status after 30 days. But, your bank will report the balance, limit, and age of the account and it will appear on the authorized user’s credit report. Thus, the authorized user’s credit score jumps up dramatically. For this, the authorized user will pay you between $100.00 and $300.00. You can do this between 4 and five times each money. No, there’s no catch here. But, yes, there are risks (discussed below).
How to use tradelines responsibly.
In the case of an individual looking to increase his or her credit score with tradelines, this is not a magic trick or a get out of jail free card. While it’s a powerful technique, it can be abused, and you may be hurting yourself with a helpful tool by applying for loans for which you do not need or for which you cannot afford to repay. Additionally, it may not work at all if your credit is ravaged by actively reporting collections, charge-offs or other negative items.
More importantly that responsible use, here’s what to avoid entirely.
Powerful things can be abused. Some companies selling tradelines inevitably wander into the legally questionable territory, with illicit funding schemes or outright illegal identity fraud, like “credit profile numbers” or “CPNs” (creating new identities). If you work with a company, search around their site to make sure they do not offer any “services” that you’re uncomfortable with. Additionally, if they’re an unestablished company, they may not know how to identify or avoid these fraudulent practices and may place your accounts at risk of closure and termination by the issuing bank. To the extent
Best Tip of All.
While there are legitimate piggybacking credit companies out there, why pay at all if you can simply ask Mom or Dad. In the case of married people, literally, add each other as authorized users to each other’s accounts and both person’s credit scores will increase (assuming the accounts are in good standing, to include low debt to credit ratios and no missed payments).
I am hopeful this was a helpful introduction into the world of tradelines and that enough information was provided so that you can enjoy the benefits – and avoid the drawbacks – of them. That is, do not use tradelines to get into debt, use them to reduce debt (such as lowering interest rates on unavoidable loans). Or, in the best case, use tradelines as an income generating tool while, at the same time, helping others.