I was working at my first mortgage job when the owner of the company suggested that my client should get someone to lend her their credit tradelines. What? How is adding someone to your tradelines like this even legal? I am here to tell you it is completely legal. My client asked her parents to add her to their credit card accounts as an authorized user and within a couple of weeks, she had a lengthy credit history and a boosted credit score on top of it.
The practice of buying tradelines in this way has been around since 1974 and is completely legal. When the Equal Credit Opportunity Act was enabled, adding anyone (spouse, child, friend or stranger) as an authorized user could not be prohibited by the banks. This was great for spouses, family members, or anyone really, to be able to instantly obtain a credit file and create a credit score legally.
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What Is A Tradeline?
We should first explain what a tradeline is.
- Credit Cards
- Mortgages
- Auto Loans
- Student Loans
- Personal Loans
- Any loan or credit account that shows up on your credit report
Tradelines have value when they are reported on your credit report. Legally buying tradelines has helped many people get the credit they need to buy homes, cars or anything else they want.
How Long Does It Take To Add Tradeline To My Credit?
It is literally the fastest way to get a good credit score if you are the right candidate for purchasing tradelines.
It is really just a phone call to the creditor. You may have to wait a few days for the creditor to report the new information. Depending on when you do this in the creditor’s reporting cycle it can be from a couple of days to a couple of weeks for it to show up on your credit report.
It should never take more than 30 days for your new credit score to arrive when you are buying tradelines unless you already have bad credit on your credit report.
How Many Tradelines Should I Add?
You will need to have a strategy going into this. There are a lot of factors that can go into a credit score and lender guidelines.
Trying to determine how many tradelines you should add depends on what you have on your credit already. If you have a couple of credit cards and the history is just not there to generate a great score, I would add at least two tradelines. If you have bad credit then I would consider having your credit repaired by a reputable company before buying tradelines.
Let’s say you have absolutely no credit then you should add at least three to five tradelines. Getting a high enough score is important as well. Just adding two tradelines may not get you the score you want.
When adding tradelines to obtain a mortgage, as most people are, then FHA will require at least 2 active tradelines with a 2-year history. Conventional mortgages require 3 active tradelines with a 2-year history.
As an example, the lenders who finance RVs often have a guideline that you had to have borrowed more than $50k at some point on your credit. Unlike real estate, RVs are in a higher risk category for lending because it is a depreciating asset.
RV financing will have their own set of guidelines to protect themselves from default. Adding a couple of credit card tradelines in this situation will only get you so far for this type of financing.
Lender’s guidelines will often determine how many tradelines you need to get approved for a loan. It is important that if you are doing this so you can purchase a home, that you are working with a mortgage professional who can offer you insight into the guideline requirements from the mortgage provider.
How High Will My Score Go From Buying Tradelines Legally?
I personally have seen credit scores appear before my eyes that were not there before for the credit invisible. Someone with a lower score can see a jump of 200 points in a couple of days. You may only see a 100 point increase. It will all depend on the tradelines you are buying and what is already on your credit report.
But be wary of any company selling tradelines that gives you a guarantee of how high your score can go. No one can guarantee you anything when it comes to an increase in credit scores.
It is important that you understand a couple of things when purchasing tradelines.
- If you have damaged credit, adding additional tradelines may not help your score at all. Consider repairing your credit report first.
- If you have high debt on your existing credit cards this will not help your credit utilization rate the way you think it will. The fact that you have cards that have high balances will still affect your scores negatively and adding additional tradelines will not help as much as you think.
- Whatever is on their credit history will now be your credit history. Good, bad and ugly equally transfer over to your credit report.
Who Is The Ideal Candidate To Buy Tradelines
Someone who is described as credit invisible will be the best candidate for purchasing tradelines. Credit Invisible means that you are virtual a ghost when it comes to credit. You have no score and no bad credit or very little bad credit.
Someone who has a history of bad credit on the other hand is not a great candidate. Especially if you have recently defaulted on your current debts. Adding tradelines does not really work for people with bad credit.
If you have bad credit it will make very little difference to add new tradelines and actually may hurt your score if you start putting more tradelines on your credit report and raising your available credit when you can not manage the credit you have. We recommend repairing your credit before you try to add additional tradelines.
Where Can I Get Tradelines For Free?
Just like anyone can add you through a tradeline company, so can your family and friends. At very little risk to them, you can be added to one of their tradeline accounts for a couple of months until you get the credit that you are applying for.
We go over how to be added as an authorized user in detail. You just need to find a family member or friend willing to do this for you. The best part about it being a friend or family member is that you can leave the tradeline for a longer period of time while you are waiting for your credit history to build.
How Much Does Buying Tradeline Cost?
This is why finding a family member or friend is ideal. Tradelines can get pretty pricey and the less expensive ones go quickly. In order to protect the owner of the account, it is wise to limit the number of times it can be used for this purpose so to entice people with good credit to do this the reward for them has to be there. There is a risk of the bank closing the account holder’s card.
Tradelines can be found under $500.00 but these are the ones that go fast in the marketplace. Many companies offer packages that range from $800-2000. The average tradeline can sell for $500-1200. The credit limit, time the account has been open and balance determine the price. Most companies require the card has less than a 15% utilization rate from the account owner.
How Long Does A Tradeline Stay On Your Credit Report?
Once you are removed from the tradeline I would expect it to fall off in 60 days. However, there are times when it will still report for 6-12 months. Just don’t be disappointed if that does not happen. It is better to go into it expecting it to fall off in 60 days and get 6 months rather than the reverse. Your credit score will drop when the purchased tradelines fall off.
Are There Risks For The Account Holder Selling Their Tradelines?
Yes. But there is only one risk that I am aware of and that risk is very low. The worst thing that can happen is the bank can exit you as a customer if they figure out what you are doing.
Banks frown on this practice. In other words, they can close the account. Not the end of the world, but losing a credit account that you were able to sell because it had value means that you will lose the valuable credit history of that account. This could potentially lower your credit score. There was a reason it was valuable.
Wrap Up!
Buying tradelines is a legal and effective way to craft the perfect credit report. It is a tool that can assist someone who is serious about having good credit get the credit they need to purchase homes, cars and other things they could not otherwise obtain.
There are some warnings though. This is not a great way to learn how to use your credit effectively because you did not earn the score that you are obtaining.
Obviously the person who is purchasing tradelines needed them for a reason. If that reason is that you lack the financial maturity to manage your credit responsibly then maybe you should not be using this technique until you have managed the credit you have properly.
If too many people abuse this unique opportunity then you can bet the banks will put pressure on the government to regulate the selling of tradelines and adding authorized users. There was talk of this in the industry a few years ago. Also, let’s not forget, the bank always has the right to exit the customer selling their tradelines.
Source: Equal Opportunity Credit Act
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