Why Did My Credit Score Go Down?

January 14, 2021CreditBy toptierfinancial

It’s never a good feeling when you notice that your credit score has dropped. You might feel confused or concerned, and you would probably wonder why your credit score took a dip. Let’s explore some of the possible reasons that could cause your credit score to decline.

Your average of accounts decreased because of a new account.

As we’ve written about many times in the articles in our Knowledge Center, the age of a tradeline is extremely important, as is your overall credit age. This is because credit age is linked to payment history, which is vitally important to your credit health.

Payment history makes up 35% of your credit score and credit age contributes 15% to your score. When you add the two together, you get 50%, which means that half of your credit score is controlled by these two connected factors.

Within the credit age category, your average age of accounts is thought to be one of the most important variables. The more age your tradelines have, the more they can benefit your credit. Therefore, anytime you decrease your average age of accounts, you run the risk of your score decreasing as a result.

So if you recently opened a new primary tradeline or if you were added as an authorized user to an account that lacks age, the decrease in your average age of accounts might be what’s behind your credit score troubles.

Your account balances increased.

Did you use credit to make a large purchase recently? Have you been accumulating more debt by not paying the full balance you charged each month? If either of these scenarios is true for you, that could explain why your credit score took a dive.

As your account balances increase, so does your credit utilization rate. This is bad news for your credit score since credit utilization contributes about 30% of your score.

If you’ve been using your credit card more often without paying it off entirely each month, that could be the source of the change in your credit score.

Low utilization is favorable since it indicates that you are not overextending yourself financially. On the other hand, high utilization shows that you are using a lot of your available credit, which means you are statistically more likely to default on a debt in the future. For this reason, high credit utilization is penalized by credit scoring models.

Fortunately, there are many strategies you can use to overcome the problem of high revolving credit utilization, such as pre-paying your credit card bill before your statement closing date, making more frequent payments throughout the month, increasing your credit limit, or getting a balance transfer card.

Read more about how to improve your utilization ratios in “What Is the Difference Between Individual and Overall Credit Utilization Ratios?”

You took out a loan.

When you open a new account, it can hurt your credit score for a few reasons. The first and most important reason is that the account has no age, which means it is going to negatively affect your average age of accounts.

In addition, there was likely a hard inquiry on your credit report as a result of applying for the new loan. In “Are Inquiries Really Killing Your Credit? What You Need to Know,” each recent hard inquiry on your report may affect your credit score by up to five points.

The new account may also have a negative impact on the “new credit” portion of your credit score. Having new credit makes you look like a riskier borrower, which means it could slightly reduce your score.

However, new credit only makes up about 10% of your credit score, so the impact of opening one new account would likely be relatively small and it would diminish over time.

You applied for credit but your application was denied.

Applying for a loan or credit card, whether your application is approved or denied, the resulting hard inquiry could damage your credit score slightly.

As we just mentioned, when you apply for credit, the lender usually has to do a hard pull (AKA a hard inquiry) on your credit report to see if you qualify.

This doesn’t always result in a new credit account being opened. Sometimes, for example, your credit application might get rejected by the lender, or perhaps you may choose to decline the terms you were offered and not proceed with opening the account. (Note, however, that when you apply for a credit card, typically the account is automatically opened when you get approved for the card.)

Unfortunately, even if you didn’t actually end up opening a new account, the fact that you applied for credit can still hurt your score. The hard inquiry still goes on your credit report whether you opened an account with that lender or not.

If you only applied for one account, then your credit score will likely only fall by a few points, if at all. If you applied for several accounts that you didn’t open within the past year, however, it’s possible that you could see a bigger dip in your score as a result of all of those inquiries on your report.

You missed a payment once or twice.

You might think that missing a payment here and there is not that big of a deal, but in reality, it can wreak havoc on your credit score. Recall that payment history is the most important factor contributing to your credit score, weighing in at 35% of your FICO score.

If you are 30 days late on making a payment even one time, this can have a significant detrimental effect on your credit, dropping your score by as much as 60 to 110 points.

If you still fail to make your payment by the following due date, then you get a 60-day late on your credit report, which hurts your credit even more.

30-day and 60-day lates are both considered minor derogatory items on your credit report, so they won’t mess up your credit as much as a major derogatory item.

However, if you get a 60-day late payment added to your credit report, do your best to catch up on payments before another 30 days pass, which is when things get even worse.

You missed a payment for three months in a row or more.

Missing a payment even once can seriously set back your credit score, but the damage will be even worse the longer you put off bringing the account current.

Once you reach 90 days past due on a credit account, that is now considered a major derogatory item, which is the worst possible type of item to have on your credit report. (Other major derogatory items include charge-offs, collections, foreclosures, settlements, judgments, repossessions, public records, and bankruptcies.)

Having a 90-day late on your credit report is certainly going to have a negative impact on your credit. A credit score drop from a major derogatory item will be even more severe and more difficult to recover from than that of a minor derogatory item. In addition, the major derogatory item could scare away potential lenders, making it harder to obtain credit in the future.

For more information on major and minor derogatory items and how they can affect your credit, see “What Is a Derogatory Item on Your Credit Report?”

One of your accounts went into collections.

If you default on a debt, meaning you did not fulfill your obligations to repay that debt, your creditor can sell your account to a collection agency, who will then try to collect the debt from you. A collection account is also a major derogatory item on your credit report, which means it can seriously hurt your score if you have an account go into collections.

Read our article on collections on your credit report to find out everything you need to know about collection accounts.

You applied for multiple credit cards in a short period of time.

Applying for multiple credit cards results in hard inquiries on your credit report, which can have a more significant impact on your score than just one inquiry.

Having too many hard inquiries on your credit report in a short period of time indicates that you are seeking a lot of new credit, which is a bad sign to lenders, and it will bring down your score.

With most credit scoring models, inquiries for credit cards are all counted separately, even if they were all around the same time. Since inquiries can each cost your credit score up to five points, that can add up quickly. (The exception to this is the VantageScore credit score, which counts all inquiries made within a 14-day window of each other as one inquiry, regardless of the type of account.)

Furthermore, if you got approved for and opened all of the accounts that you applied for, then you could also end up with too many new credit accounts on your credit report.

One of your credit cards was closed.

Many consumers mistakenly believe the credit myth that it will help their credit if they close some of their accounts. In a way, that makes sense, because it lowers the amount of available credit you have, which reduces the potential amount of debt you could get into if you were to use all of your available credit.

However, that is not how credit scores work, because unfortunately, credit scores don’t always make sense.

We dispel this common misconception and more in “Let’s Get to the Bottom of These Credit Myths.”

The truth is that closing an account almost always hurts your credit instead of helping it.

With revolving accounts, such as credit cards, closing an account reduces your total credit limit by removing the credit limit of that card. When you reduce your credit limit, that action increases your overall credit utilization ratio, meaning that you are now using a larger fraction of your available credit.

This hurts your credit score because having a high credit utilization ratio is penalized by the credit scoring algorithms, whereas maintaining a low utilization ratio is rewarded.

The worst-case scenario for your credit when closing an account is if the account is closed while it still has a balance on it. In this case, that individual account will look like it is maxed out or over the limit because it has a balance but no credit limit. That alone is enough to significantly harm your credit, and the increase to your overall utilization ratio only worsens the problem.

Depending on what else is in your credit file, closing a credit card could also negatively affect your credit mix, which could result in a small credit score drop.

On the plus side, the reason why an account was closed does not play a role in your score, so you won’t be affected more negatively if the card was closed by the issuer than if it was closed at your request.

For more information about closed accounts on your credit report, see “How Do Closed Accounts Affect Your Credit?”

There was fraudulent activity on your accounts.

Have you checked your credit card statements lately?

An unexpected decrease in your credit score could be the result of fraudulent activity on your accounts.

If you see any charges on your statement that you do not recognize, then it could be fraudulent activity that is bringing down your score. Perhaps someone was able to obtain your credit card information by phishing or through a data breach and used it to run up the balance on the card.

It’s important to monitor your credit accounts regularly so that you can catch any suspicious activity early on. Better yet, set up email or mobile notifications on your account that will alert you to fraudulent activity instantly.

If a criminal does manage to get access to your account, report the fraudulent charges to your credit card issuer immediately and ask to have the charges reversed. Most credit card companies have a zero liability policy, which means you won’t be held responsible for paying for any of the fraudulent charges.

You paid less than the minimum payment.

If your cash flow is tight, it can be tempting to send the bank or credit card company a partial payment instead of the full amount that is due that month. You may think that it’s not as big of a deal as not paying at all, because at least you are sending them some of the money.

Unfortunately, it doesn’t work that way. If you do not cover the full minimum payment by the due date, it will not be counted as an on-time payment.

If you can bring the account current before 30 days pass, you may still have to deal with a late fee from your credit card issuer (although it’s worth asking them to waive the fee), but at least the late payment will not show up on your credit report.

On the other hand, if you do not make a sufficient payment and 30 days go by, then you will have a late payment pop up on your credit report, which can definitely take a toll on your credit score.

To prevent this from happening, as soon as you know you will not be able to make the full payment, contact your credit card issuer and ask if they have a financial hardship program or try to negotiate an arrangement with them that allows you to pay what you can without damaging your credit.

You didn’t use your credit card for a long time.

Your credit card issuer might have closed your account if it had been inactive for a long time.

If you don’t use a credit card for a long period of time, it’s possible that your credit card issuer may decide to close your account due to the lack of activity.

As we discussed above, a closed credit card is bad news for your credit since the loss of available credit hurts your credit utilization and it may also damage your mix of credit.

According to The Balance, the credit card company is not required to give you advance notice if they plan to close your account, so it’s best to take proactive measures to prevent this from happening.

To avoid having your card closed due to inactivity, make sure you use it to make a purchase at least once every few months. An easy way to do this is to use the credit card to pay for a subscription service that renews each month. Then, set up automatic bill payments on your credit card and the whole process will be automated.

You finished paying off an installment loan.

Making the final payment on your auto loan, student loans, or mortgage is an exciting accomplishment. Yet, when you finish paying off an installment loan, your credit score may decrease instead of increase.

Even though you now have less debt, which sounds like it would help your credit score, this may not outweigh the negative impact to your mix of credit. The paid-off installment loan will now report as a closed account, which can be harmful to your credit if all you have left is a few revolving accounts.

@LizOfficer shared a real-life example of this on Twitter.

This Twitter user commented that paying off her loan made her credit score go down since it affected her mix of credit.

An account that you are piggybacking on became delinquent.

Sometimes being an authorized user on a credit card or having a joint account can be a risky thing. You are relying on the other person to pay their bills on time and to manage their balances well, otherwise their behavior can compromise your credit.

In other words, an ideal tradeline should have a low utilization ratio, it should have a higher age than your average age of accounts and your oldest account, and most importantly, it needs to have a perfect payment history.

Therefore, you want to avoid being added as an authorized user to a tradeline that has any derogatory marks on it so that those derogatory items don’t get added to your credit file and end up damaging your credit.

That’s the danger of piggybacking on a friend or family member’s credit card—even if the tradeline is perfect when you are first added to it, there’s no guarantee that it will stay that way.

If your authorized user tradeline does get any missed payments on its record, that could definitely hurt your credit, and it would be smart to remove yourself from it immediately. To do so, simply call the credit card issuer and request to be removed from the account, as most banks allow you to do this without needing to go through the primary account holder.

Delinquency on the part of the primary account holder can cause problems if you are piggybacking on someone else’s credit account.

You declared bankruptcy.

Bankruptcy is one of the worst things you can have on your credit report. Since declaring bankruptcy essentially means you are asking to be released from the legal obligation to repay your debts, it shows lenders that you have an extremely high risk of defaulting in the future, so it can have a severe negative impact on your credit score.

There are inquiries on your credit file that you did not authorize.

Unauthorized inquiries on your credit file can unfairly drag down your credit. In our article on credit inquiries, we reported that each hard inquiry on your credit report can potentially cost you up to five points each.

Fortunately, you have the right to dispute any hard inquiries on your credit report that you did not authorize. You can learn more about the credit dispute process in “How to Fix the Most Common Credit Report Errors.”

Your credit file got merged with someone else’s.

Sometimes inaccurate information can get on your credit report not as a result of fraud or because your lender reported it incorrectly, but because your credit file accidentally became mixed with the information of another person.

This is called a “mixed credit file” or “mixed credit report” and it usually occurs with two consumers who have similar names.

If the credit history of the other consumer with whom your file has been mixed contains negative information, that would obviously be detrimental to your score, and you would need to correct the situation by filing a dispute with the credit bureau.

This is an example of why it’s important to check your credit report regularly. If there is incorrect information on your credit report that should be removed, you don’t want to find out about it when you’re trying to apply for credit. You need to catch and correct credit report mistakes early so that they don’t stand in the way of you achieving your financial goals.

You maxed out one or more of your credit cards.

Credit utilization makes up nearly a third of your FICO score, which means it’s critically important to keep your utilization low if you want to maintain a high credit score. Maxing out even just one credit card can have a significant negative impact, and if you max out multiple cards, you’ll be even worse off.

Check out our article on utilization ratios for tips on how to keep your utilization rate at an optimal level.

Someone opened an account in your name.

An account on your credit report that you don’t recognize could be an account that someone else fraudulently opened in your name.

We already covered how opening a new account can negatively affect your credit initially, but don’t forget that the same thing can happen if someone else uses your name to sign up for a new account.

If you see that your credit score has decreased, take a look at the inquiries and accounts on your credit report to see if there are any items that should not be there.

You have “double jeopardy” with collection accounts on your credit report.

Debt collection agencies are not known to be the most trustworthy entities and often do not have the best practices when it comes to keeping track of debts and contacting consumers. Information often gets lost or misrecorded when it is transferred between creditors and sometimes numerous collection agencies.

Because of this, some consumers find themselves with more than one entry for the same open collection account on their credit report, which is known as “double jeopardy.”

While the same collection may be listed multiple times due to the account changing hands, only the entity who currently owns the debt should be reporting the account as open.

Fortunately, if a collection is being reported in error, you can dispute the inaccurate information and have the information be corrected or potentially removed altogether.

Your credit report says you missed a payment even though you paid on time.

Dispute any mistakenly reported late payments so that they don’t unfairly affect your credit score.

Since payment history is the most important factor in your credit score, an incorrectly reported missed payment could severely damage your credit, especially if you are starting with very good credit. The higher your score to begin with, the more you stand to lose from a credit mistake.

This type of situation is another example that demonstrates why it’s so crucial to regularly check your credit report. If you always made all of your payments on time, you might assume that you must have a spotless credit record, only to find out at an inconvenient time that a creditor has been incorrectly reporting that you missed a payment.

Keep an eye out for errors like this on your credit report so that you can dispute them right away.

Your credit card issuer reduced your credit limit.

Sometimes, credit card issuers lower the credit limits of their cardholders, even for those who have consistently managed their accounts responsibly.

Unfortunately, they are usually allowed to do this without asking for your permission or letting you know in advance, so it may come as a nasty surprise when you swipe your credit card and get declined, or when your credit score takes a dive because your credit utilization is suddenly much higher.

There are a few reasons why your bank may reduce your credit limit, such as the following:

Credit card issuers sometimes cut credit card limits, which hurts your credit utilization ratio.

Your balances have been increasing, which indicates that you are taking on more debt and might be at a greater risk of defaulting.
You missed a payment and your account becomes delinquent.
Your account was inactive because you did not use your credit card enough.
The economy is down and lenders want to minimize their risk exposure levels.

Regardless of why your credit limit took a hit, the result is the same: with less available credit, your credit utilization increases, which is bad for your score.

If your credit card issuer slashed your credit limit, check out “How to Increase Your Credit Limit” for some useful tips, and don’t be afraid to give your bank a call to ask them to reconsider.

A collection account was deleted from your credit report.

Surprisingly, it is actually possible that getting a collection account removed from your credit report could make your credit score go down instead of up.

We talk about this in greater detail in “Collection Accounts on Your Credit Report: The Ultimate Guide” and “What Are Credit Scoring ‘Buckets?’” by credit expert John Ulzheimer, but the basic idea is that there are different credit scoring “buckets” that have slightly different methods of calculating credit scores for the consumers within each bucket.

By removing a collection account from your credit report, it is possible that you could move from one bucket into another bucket where your score will now be calculated differently. As a result of this new algorithm being applied to your credit report, your score could turn out to be lower than it was when you were in the first bucket.

You haven’t used any credit in a long time.

If you have used credit in the past but not recently, some of your old accounts may have fallen off of your credit report altogether. Accounts that are closed or inactive do not stay on your credit report forever. Positive accounts will generally stay on your credit report for 10 years, whereas negative accounts may stay on your credit report for up to 7 years.

When these old accounts age off of your credit report, you lose all of the credit history associated with them, the most important of which is the payment history. Because you are losing valuable credit history, your score could take a hit.

Those with thin credit files or those who have not used credit in several years will need to focus on building credit in order for their credit score to recover.

Conclusions

When it comes to your credit score, minor fluctuations are normal, so there’s generally no need to fret about losing a few points here and there.

If you are practicing good credit habits and paying all of your bills on time, it’s probably not necessary to watch your credit like a hawk and check your score every single week, and a change of a few points in either direction should not cause you to panic.

However, as we have seen, you don’t want to neglect your credit entirely, since mistakes can and do happen.

In addition, keep in mind that credit moves can sometimes have unexpected results, particularly in cases where you may be migrating from one credit scoring “bucket” to another.

If you see a significant drop in your credit score, that is definitely worth investigating further so that you can understand why it happened, address the issue, and hopefully get some of those credit score points back.

Read more: tradelinesupply.com

How To Use The Fair Credit Reporting Act To Your Advantage

July 11, 2020CreditBy toptierfinancial

Using a credit card is easy — you use the card to buy things and then pay the credit card bill.

A credit card can sometimes be difficult, however, when dealing with your credit file. From a missed payment to a loan that isn’t yours that’s incorrectly listed on your credit report, there are all kinds of ways your credit score can drop. And not all of them are from something you did wrong.

Consumers have protections under the law regarding their credit reports — which is where credit scores and credit problems are listed for lenders to check before offering you credit. Errors on a credit report can drop your credit score, making it harder to get a loan, credit card, rent an apartment, or qualify for insurance coverage, among other things.

The main law that protects consumers from credit errors is the Fair Credit Reporting Act, or FCRA. Here are some of the rights you have under this law and how to use it to protect your credit:

View credit reports

The FCRA entitles you to review your credit file from each of the three main credit bureaus for free once every 12 months. You can do one check every four months from each of the three — Equifax, Experian and TransUnion — if you really want to be on top of it.

Start by going to AnnualCreditReport.com to request your credit file online. Only use that website and don’t use a copycat site that charges fees for what should be a free service. You’ll need to verify your identity to get online access. You can also request your credit file through an automated phone system or the mail.

The FCRA applies to all consumer reporting agencies. You can also look at reports from other consumer reporting agencies that collect noncredit information about you. These include rent payments, insurance claims, employers and utility companies. The Consumer Financial Protection Bureau lists the reporting companies and how to request a free report from each.

Check your credit score

The law allows you to request a credit score, though it’s legal for credit agencies and other businesses to charge you a fee for this service. Some credit cards provide scores for free, so check with your credit card issuer first.

A credit score isn’t the same as a credit report. Information in a credit report determines a credit score, and each credit bureau can use a different scoring model that requires it to provide different information. You have different credit scores, depending on which factors are weighed more heavily.

Monitoring your credit is vital. Make sure that you review your credit report for any inaccuracies.

Know who can view your credit report

The FCRA doesn’t allow a credit reporting agency to share your credit file with someone who doesn’t have a valid need. Some inquiries, such as from a potential employer or landlord, require your written consent. And, they can only check your credit report, not your credit score.

The credit reporting agencies can share your credit report for legitimate reasons, such as when you’re applying for credit, insurance, housing or with a current creditor.

Disputing errors

Getting a credit report in your hands can lead to all sorts of eye-opening concerns. Anything that’s listed as negative should be checked for accuracy. Here are some things to look out for:

Eviction that wasn’t legal.
Creditor listed that you didn’t have an account with.
Loan default.
Wrong name.
Wrong address.
Wrong Social Security Number.
Incorrect loan balance.
Closed account reported as open.
A loan you didn’t initiate.

Some errors may be simple to resolve and others you may need to do more research on before disputing them to ensure they’re incorrect.

For example, you may not recognize the name of a creditor and assume you don’t have an account with them. But it may just be a store credit card you recently applied for that is listed by the issuing bank’s name. Or maybe a home or auto loan was sold to a new loan servicer.

Other errors could be reason to suspect identity theft, or there could just be wrong information that’s bringing down your credit score.

If you suspect identity theft, such as someone taking out a credit card in your name, then file a police report and report it to your credit card company and the credit reporting agencies.

To dispute erroneous information, use certified mail to send the credit bureau a letter and copies of documents explaining the error. If a loan still shows an outstanding balance and you have written proof that it was paid off, for example, send a copy to the credit agency.

The Federal Trade Commission has a simple sample letter to dispute errors on your credit report.

Credit agencies have 30 days to investigate and respond to your dispute, unless they deem it frivolous.

If it corrects an error, it must send you a free copy of your credit report through AnnualCreditReport.com so you can see that the corrections have been made.

A time limit to negative information

The FCRA doesn’t allow credit bureaus to report negative information that’s more than seven years old, though it allows some forms of bankruptcy to remain on a credit report for 10 years.

There’s also a time limit for positive credit information such as on-time payments and low balances — up to 10 years after the last date of activity on the account.

Rejections based on credit report

If your application for credit, job, insurance or housing has been denied because of information in your credit report, the law gives you the right to know this information.

The landlord, employer or other entity that denied your application must notify you and give you the name, address and phone number of the credit reporting agency that provided the information.

The FCRA allows you to get a free copy of your credit report from that reporting agency within 60 days of the action against you. That’s in addition to the three free credit reports allowed annually.

To best deal with a potential rejection ahead of time, it’s smart to check your credit report before applying for credit, rental unit or related use of your credit report and check it for errors. Give yourself enough time to fix them.

Go to court

If these actions or a complaint with the CFPB doesn’t resolve your dispute, you may be able to sue for damages in state or federal court. You can sue a credit reporting agency or related parties for violating any of the above rights.

However, it’s worth knowing that your right to legal action doesn’t start until after the creditor or credit reporting agency has been notified of an error and has a chance to fix it. In other words, you’ll only be awarded damages if the adverse action happened after you reported the error.

So if you didn’t get approved for a mortgage because of a mistake on your credit report, it’s unlikely you’ll be compensated for losing out on the house if you lost out on it before reporting the mistake.

The post How To Use The Fair Credit Reporting Act To Your Advantage appeared first on Better Credit Blog | Credit Help For Bad Credit.

How Do Closed Accounts Affect Your Credit?

March 29, 2020CreditBy toptierfinancial

Most of the time, when we talk about credit, we are talking primarily about the impact of open accounts. But are we underestimating the importance of closed accounts? Let’s shed some light on the less commonly addressed question of how closed accounts can affect your credit.

What Is a Closed Account on a Credit Report?

A closed account on your credit report is simply any credit tradeline that has been closed, whether it was terminated by the customer or the creditor.

There are several different reasons why an account may be closed.

If you don’t use your account for several months, it could get shut down for inactivity. Photo by Hloom on Flickr.

If you don’t use a credit card for several months, for example, you could get your credit card closed for inactivity. In this case, your credit report might say “account closed by credit grantor” for that account since the lender was the party who terminated the account.

Other reasons a credit card may be closed by the creditor include:

The credit card issuer is no longer offering that type of credit card or is replacing it with a different card
The credit card issuer determined that there was fraudulent activity on the account
The card was stolen or lost

Consumers may also want to close their own credit accounts from time to time, in which case the account might be notated as “account closed by consumer.” As an example, if one of your credit cards increases its annual fee or if you no longer feel that the fee is worth it, you might decide to close that account.

What Do Closed Accounts Mean on Your Credit Report?
Closed Accounts and Credit Utilization

Use our tradeline calculator to calculate your credit utilization ratios.

Now that you know what a closed account is and why an account may be closed, you may be wondering what a closed account on your credit report means for your credit.

The main impact of closing an account on your credit is the effect on your utilization ratio. By closing an account, you are reducing your total available credit limit, which could increase your overall utilization ratio if you have balances remaining on your other accounts.

Therefore, if you have balances on any of your other cards, you probably don’t want to close an account that is helping to keep your overall utilization down, as well as improving your ratio of low-utilization to high-utilization accounts.

On the other hand, if you pay down all your other credit cards to 0% utilization, you can safely close an account without impacting your credit utilization.

Try using our tradeline calculator to calculate your individual and overall credit utilization ratios and see how closing one of your accounts could affect your utilization rate.

Closed Accounts and Credit Age

Many people believe that once an account is closed, it will no longer count toward your credit age. However, according to an article by credit expert John Ulzheimer in The Simple Dollar, this is a myth.

“Credit scoring models like FICO and VantageScore do indeed consider the age of your oldest account and the average age of your accounts when calculating your credit scores. However, closing an account does not remove its history — including its age — from your credit reports.

Not only will the history of a closed account remain on your credit reports, but credit scoring models will continue to consider the age of the account as well. And, even better, a closed account continues to age. So, if you closed a five-year-old credit card today… in 12 months it’s going to be a six-year-old credit card.”

Are Closed Accounts on Your Credit Report Bad?

Closed accounts on your credit report are not inherently a bad thing. In fact, they can often be a good thing, as we will elaborate on below.

Closed accounts on your credit report, unless they are derogatory, are not bad for your credit. In fact, they are probably giving your credit a boost.

However, derogatory closed accounts can definitely have a negative impact on one’s credit.

For example, if you had a credit card closed due to delinquency, meaning the creditor closed the account because you had stopped paying it, the account likely still has a balance owed.

Having a closed credit account with a balance on your credit report could really hurt your credit. According to some sources, closing a credit account removes its credit limit, so a credit card account closed with a balance would be considered maxed out or over-limit.

Credit utilization is a major influence on your credit score, so maxing out your utilization by having a credit card account closed with a balance could result in a big dip in your score.

However, other sources say that a closed account with a balance will be treated as an open account until the balance is paid off, at which point you can expect some damage to your score, especially if you have balances on your other credit cards.

The specific way that closed accounts are treated may depend on which credit score algorithm is used to calculate your score as well as other variables in your credit profile.

Should I Pay Off Closed Accounts on My Credit Report?

If your account was closed with a balance but remains in good standing, maintain its good standing by continuing to make payments until the account is paid off.

If your account was closed due to delinquency, the first thing to do is call your credit card issuer to check the status of the account. If the debt hasn’t been sold to a collections agency yet, you’ll want to start paying off the account immediately to prevent it from going to collections. You could end up with bad credit if you have a collection account on your file.

If the account is already in collections, however, whether or not you should pay it off is an entirely different question that depends on your individual situation.

See our article on collection accounts on your credit report for more information on how to handle collections.

Open vs. Closed Accounts on Credit Report

In the tradeline industry, we often get questions about whether closed accounts have an impact on one’s credit and, if so, what value they hold relative to open accounts.

It is possible to have a good credit score without having any open accounts. Photo by CafeCredit.com, CC 2.0.

This is an important question, because generally when you buy tradelines you are an active authorized user for two reporting cycles, and after you are removed from the account, it will begin to show as a closed account on your credit report.

Therefore, it is useful to know what impact the tradeline might have after it converts to a closed tradeline.

From what we have seen, closed accounts often can still be a very powerful influence on one’s credit score.

Remember, the age of a closed account still factors into your credit, and accounts continue to age even after they have been closed. Age and payment history go hand-in-hand and together make up 50% of a FICO score, and since closed accounts can still contribute to these factors, this implies that closed accounts can still have a strong effect on your credit.

However, closed accounts may have a diminishing impact over time, since credit scores tend to prioritize recent events.

Can You Have Good Credit With Only Closed Accounts?

It is possible to have a good credit score while only having closed accounts in one’s credit report. We have seen examples of people with credit scores in the 700’s who only had closed accounts in their credit file.

Can I Have Closed Accounts Removed From My Credit Report?

If you have closed accounts on your credit report that are not delinquent or hurting your credit, then there is no need to remove them. They may actually be helping your credit, even though they are closed.

Accounts that were closed in good standing should automatically fall off your credit report after 10 years, while delinquent closed accounts will fall off your credit report after 7 years.

How to Get Rid of Closed Accounts on Your Credit Report

If your credit card has been closed, you can try calling your credit card issuer to ask if the account can be reopened, but don’t wait too long.

If a closed account on your credit report is reporting inaccurately, then you can dispute it and have the credit bureaus update the account with the correct information or remove it.

Contact each credit bureau or check their websites for instructions on how to dispute accounts on your credit report.

If a Credit Card Is Closed, Can It Be Reopened?

In some cases, consumers may be able to reopen closed credit cards.

If your account was closed due to fraud or delinquency, banks typically do not allow these accounts to be reopened.

If it was closed voluntarily on your part or closed due to inactivity, however, you might have a chance to reopen the account if you don’t wait too long.

Only some banks will allow this, and those that do have varying time limits as to when you can reopen an account, so check with your credit card issuer.

If you’re within the time window and your account is eligible to reopen, here’s how to reopen a closed credit card account:

Call the phone number provided on the back of your credit card (or if you don’t have the physical card anymore, look up the phone number for the customer service department for that card).
Be ready to provide your personal information and answer security questions.
Explain why you closed the account and why you are requesting to reopen it.

Some issuers may require a hard inquiry before they can approve your request, which could cause a small, temporary drop in your credit score.

If your bank doesn’t allow you to reopen the card, the next best solution might be to re-apply for the same card or apply for a new credit card altogether.

Take-Home Points About Closed Accounts

Accounts may be closed voluntarily by the consumer or closed by the creditor due to inactivity, fraudulent activity, or delinquency.
Closed accounts are not necessarily bad and can even help your credit.
Closing an account could affect your credit utilization.
Closed accounts still contribute to your credit age and they continue to age even after they are closed.
Closed accounts can still have a powerful impact on credit scores.
Continue paying off accounts that were closed with balances to prevent them from going to collections.
You can dispute closed accounts that are not reporting correctly.
You may be able to reopen a closed credit card account depending on the circumstances.

Read more: tradelinesupply.com

Is a Balance Transfer Worth It? How to Know if It’s Right for You

March 12, 2020CreditBy toptierfinancial

Balance transfers are a somewhat controversial topic in the world of credit repair and debt payoff.

They can be a wonderful tool for helping consumers get out of credit card debt without being crushed by sky-high interest rates. On the other hand, if you’re not careful, they can also enable you to get yourself even deeper into debt than you were before.

If you’re interested in learning more about how balance transfers work, the pros and cons of balance transfers, and whether or not one could benefit your credit, then look no further: this article contains everything you need to know about balance transfers.

What Is a Balance Transfer?

A balance transfer is exactly what it sounds like: it is the process of transferring a balance from one credit card to another, typically one with a lower interest rate. By transferring your balance from a higher-interest card to a lower-interest card, you can save money on interest while paying down your debt.

Essentially, it’s kind of like using the lower-interest credit card to pay off the higher-interest card.

If you carry a credit card balance from time to time, you may have received from balance transfer offers in the mail from various credit card issuers, eager for you to apply for their credit card and transfer your debt to it. And you may have wondered, what’s in it for the banks? Why do they want to take on debt that you have with another bank?

A balance transfer is a way for a bank to get you—and your debt—to switch over to them from a competitor. To incentivize you to do this, they may offer a great deal on your balance transfer, such as 0% interest on your balance for 18 months.

Of course, the bank doesn’t make any money when you are not paying interest, so what are they gaining from this?

Firstly, the banks charge a small fee for each balance transfer (typically around 3% – 5%; more on this below). They also earn money on transaction fees when you swipe your card if you make purchases with the new card.

In addition, the bank is hoping that they will eventually be able to make money off of you in one or more of these scenarios:

You still have a balance left on the account when the promotional low-interest offer ends, and they can then begin to charge you a higher interest rate on the remaining balance.
You make purchases with the card, which they can charge the normal interest rate interest on, and which makes it more likely that you will still have a balance at the end of the introductory period.
You miss a payment for two months in a row and get a 60-day late on the account, which allows the bank to increase your interest rate to a high penalty APR of up to 29.99%.

If you make any of the above mistakes, then your account suddenly becomes very profitable for the bank instead of interest-free credit for you.

If you miss a payment for 60 days, your credit card issuer can bump up the APR from 0% to a high penalty rate.

The banks know that a certain percentage of customers will ultimately end up generating profit for them, which means that offering balance transfers is an effective marketing tool even if some customers “beat the system” by paying off their entire balance without paying a cent of interest.

If you’re smart about making a plan to avoid potential pitfalls, you may be able to save yourself a lot of money and pay down your debt faster by using a balance transfer to your advantage.

What Is a Balance Transfer Credit Card?

A balance transfer credit card is a credit card that has terms that were specifically designed to encourage customers to transfer a balance to the card. It can still be used for purchases, just like a normal credit card (although that’s usually not a good idea, as we’ll explain later on), but its primary purpose is for balance transfers.

What Is a Good Balance Transfer Credit Card?

A good balance transfer credit card is any card that offers a low balance transfer fee and an introductory period during which there is a low APR or, ideally, no interest charged at all.

In addition, in the interest of minimizing costs, you’ll probably want to look for cards that do not charge an annual fee.

To summarize, the perfect balance transfer credit card would ideally have the following three things:

0% introductory APR for at least 12 – 18 months
0% introductory balance transfer fee
No annual fee

However, it is more typical to find cards that have a combination of two out of the three. For example, you might apply for a balance transfer card that has a 0% APR for 18 months and no annual fee but a 3% balance transfer fee.

Some balance transfer credit cards may also double as reward cards that offer cash back or rewards points on purchases. While this might be a nice feature to have down the road, it’s best to avoid making purchases on your new balance transfer card while you pay off the balance. The promotional balance transfer APR usually doesn’t apply to purchases, which means they will begin to accumulate interest at the regular rate immediately.

Although some balance transfer credit cards may also offer cash back rewards, it’s best to avoid using them for purchases until you have finished paying off your balance.

Plus, the credit card company can choose to apply your payments first to the balance you transferred, instead of new purchases, so it’s possible that interest on those charges could keep racking up until you are finished paying off your entire balance transfer.

Which Balance Transfer Card is Best?

For specific credit cards that are good for balance transfers, you can browse online resources, such as Credit Karma’s list of the best balance transfer cards. Creditcards.com and NerdWallet have similar roundups of their favorite balance transfer cards.

Compare and contrast the terms for each card you are interested in to find the best balance transfer deal. Many resources also estimate what credit score range you may need in order to get approved for different cards.

Using an Existing Card for a Balance Transfer

You don’t necessarily have to apply for a new credit card in order to transfer a balance—you may already have a credit card that you could use for a balance transfer. Sometimes banks will offer balance transfer promotions with 0% APR to their existing customers, so keep an eye out for any balance transfer deals from your credit card issuers.

You could even consider potentially transferring a balance to another credit card without any sort of promotional offer if it already has a significantly lower interest rate.

How Does a Balance Transfer Work?

When you apply for a new balance transfer credit card or accept a promotional balance transfer offer with an existing card, you provide information about the account you want to transfer a balance from.

Alternatively, if you are applying for a new card, you could wait and see what credit limit you are approved for first, and then contact the issuer of your new card to set up a balance transfer.

Once you have been approved for the new card (if applicable) and submitted your balance transfer information, the issuer of the card you are transferring a balance to will contact the other bank in order to pay your balance.

It may take a few weeks for the transfer to be completed. In the meantime, you will need to keep making payments on your existing account as usual so that you don’t miss a payment while waiting for the balance to be transferred. Once the transfer has gone through, then you can start making payments toward the new account.

What Is a Balance Transfer Fee?

Most credit card issuers will charge a fee for conducting a balance transfer. This fee is a certain percentage of the balance you are transferring. Typically, balance transfer fees range from 3% to 5%. They may also have a minimum fee of around $5 to $10 that is assessed for smaller balances.

For example, if you want to transfer $5,000 and the balance transfer fee is 5%, then you would be charged $250 for the balance transfer ($5,000 x 0.05 = $250).

Your credit card issuer may supply you with balance transfer checks, which you can use to pay off the balance on your higher-interest credit card.

You pay the balance transfer fee to the bank that provides the credit card that you are transferring the balance to. The bank will simply add the fee to your balance. In the above example, when your balance transfer is complete, you would end up with a balance of $5,250 on the account.

What Is a Balance Transfer Check?

If you regularly carry a balance on your credit cards from month to month, then you may have seen balance transfer checks before. Credit card issuers often send them in the mail along with a promotional balance transfer offer.

Balance transfer checks are checks that the issuer of your balance transfer credit card may supply to you which you can then use to pay off the balance that you want to transfer from another card. To do so, you would simply make out the check to the credit card company you want to pay for the amount you want to transfer.

Some banks may allow you to write the checks to yourself and deposit the money directly into your bank account, which you can then use to pay another credit card company. If this option is available to you, before rushing out and cashing the checks in your name, first check to see whether the credit card issuer will consider it a cash advance, in which case you would likely get charged a cash advance fee as well as a higher interest rate on the balance.

Can You Transfer a Balance Online?

While using balance transfer checks is one way to complete a balance transfer, it is often easier and faster to complete the process online or over the phone.

If you apply for a balance transfer card online, it is likely that you will have the chance to provide the account information for the account you’d like to transfer a balance from so that your new credit card company can make the payment for you.

You can request a balance transfer online as part of your application for a new balance transfer credit card.

Alternatively, you can call your new credit card issuer and provide the necessary information to complete the balance transfer over the phone.

Can You Transfer a Balance Between Products From the Same Bank?

You can usually transfer a balance between most banks, and you can sometimes even transfer other types of balances, such as installment loan debt, to a credit card.

Typically, however, credit card issuers will not allow you to transfer balances between different credit cards you have with the same issuer, including branded cards that are issued by the same bank.

For example, if you have two different credit cards with Chase, you likely wouldn’t be able to transfer a balance from one to the other. However, you could transfer your balance from your Chase card to, say, a Bank of America or Discover credit card.

The reason for this is that the banks are trying to use balance transfers as an incentive to gain new customers, which equate to new sources of revenue. An existing customer transferring a balance between two cards with the same bank doesn’t create any profit for the bank, so they have nothing to gain by offering balance transfers between their own credit cards held by current customers.

What Types of Debt Can You Transfer to a Balance Transfer Card?

Some credit card issuers may allow you to transfer other types of debt, such as installment loans.

Other types of debt that you may be able to transfer to a balance transfer credit card include student loans, personal loans, home equity loans, and auto loans. NerdWallet has a detailed list of the types of transfers that are accepted by several major credit card issuers.

Since installment loans typically have significantly lower interest rates than credit cards, it usually only makes sense to transfer installment debt to a credit card if you are confident in your ability to pay it off while you still have 0% interest on balance transfers.

What Is a Balance Transfer Credit Limit?

When you get approved for a balance transfer credit card, the card issuer will assign you a credit limit, which is the maximum amount of credit that you can carry on the card. Often, the amount that is available for balance transfers may either be the same as your total credit limit, meaning you can use your entire credit limit for balance transfers.

Other times, the credit card company may impose a separate balance transfer credit limit, which is the maximum amount of credit that you can use for balance transfers.

The balance transfer credit limit is not an additional amount that can be added on top of the total credit limit; rather, it is a specific portion of your total credit limit that can be used for transfers.

For example, if you get approved for a card that has a $5000 credit limit and a $4,000 credit limit, that means you can use $4,000 of the $5,000 of available credit for balance transfers. If you use the full balance transfer credit limit, after that, there will be $1,000 of your credit limit remaining, which will only be available for purchases.

It’s important to remember that balance transfer fees count toward your credit limit, so unless you find a card with no balance transfer fees, you won’t be able to transfer the full amount of your credit limit.

Therefore, you should calculate the total amount of the fees you will be charged before transferring to make sure you are staying below your credit limit. As an example, if your balance transfer credit limit is $10,000 and the balance transfer fee is 3%, that means you should transfer a balance of no more than $9,700 to leave room in your credit limit for the $300 fee ($10,000 x 0.03 = $300).

Although there is no hard limit on how many balance transfers you can do, it’s usually recommended to transfer a balance no more than once or twice.

How Many Balance Transfers Can You Do?

When it comes to the number of balance transfers allowed on one card, it depends on the policy of your balance transfer card issuer. For example, they may limit you to a maximum of three balance transfers when applying for the card, in addition to keeping the total amount transferred under your balance transfer credit limit.

More generally, in theory, you could do as many balance transfers as you like. In reality, of course, transferring a balance several times isn’t the best idea.

Having a lot of balance transfers on your record might lead creditors to assume that you don’t intend to or aren’t able to pay back your credit card debt quickly and that you are just transferring your debt between different credit cards to avoid paying interest, according to Discover.

Eventually, creditors might stop approving you for balance transfer cards, leaving you with a high interest rate when your promotional APR expires.

Plus, transferring a balance multiple times before paying it off might make you feel like you are making progress, when you are really just moving your debt around from one card to another without implementing an effective plan to pay it off.

Instead of falling into a cycle of endless balance transfers, which won’t help you pay off your debt, make sure you have stopped the cycle of spending that may have gotten you into debt in the first place and ask yourself whether you can create a plan to feasibly pay off your debt after your first balance transfer.

Will a Balance Transfer Close My Account?

If you are wondering whether the account that you transferred a balance out of will be closed after the balance transfer is complete, rest assured that it will not. The only thing that will happen is the balance of that account will decrease by the amount of the transfer.

Closing your credit card account is up to you. If you would like to close your account once there is no longer a balance on it, then you can contact your credit card issuer and request for them to close your account. You may want to close the account if it has an annual fee or if you think that having no balance on the account might encourage you to max it out again.

A balance transfer will not automatically close your old account. In fact, you should keep the old card open and in good standing so that it can help your credit utilization ratio.

However, unless you have a strong reason to close the account, such as the examples above, then it is typically recommended that you leave the account open.

As you may know from our article on how closed accounts affect your credit, the main reason that keeping accounts open is preferable is that they can only help your revolving credit utilization ratio when they are open. By closing an account, you take away the credit limit of that account from your utilization ratio, thus increasing your overall credit utilization.

So if you want to help out your credit score by maintaining a low credit utilization ratio, consider keeping the account open after the balance transfer. You don’t have to spend a lot on the card to keep it open.

Instead, you can charge something small every few months or use it for a recurring subscription service charge and simply pay it off when the bill is due. Even better, set up automatic bill pay so you don’t have to worry about remembering to pay the bill, which is a great credit hack!

How Much Does a Balance Transfer Cost?

To determine the cost of a balance transfer, all you have to do is simply multiply the amount of debt that you want to transfer by the balance transfer fee that your credit card issuer will charge.

For example, if you plan to transfer a balance of $8,000 and the balance transfer fee that will be assessed is 5%, then the fee associated with your balance transfer will cost you $400 ($8,000 x 0.05 = $400).

This amount would be added to the balance of the account that you are transferring to for a total new balance of $8,400.

However, the cost of a balance transfer may not be limited to the balance transfer fee. It is important to consider the interest that will be charged on your balance transfer as well.

If you can take advantage of a promotional 0% interest rate, then, obviously, you do not have to worry about interest charges as long as you pay off the balance by the end of the promotional period.

On the other hand, if you think you do not think that you will have finished paying off the balance by the end of the promotional period, then you should take into account the interest that will be applied once the time is up.

Some balance transfer deals may offer a low interest rate for a longer period of time rather than a 0% APR. If this is the case for you, then you might want to try out a credit card repayment calculator, such as this one from Credit Karma, to help you determine how much you could end up paying in interest.

It’s important to do the math before committing to a balance transfer offer in order to ensure it’s a smart move financially.

Will a Balance Transfer Save You Money?

A balance transfer may very well save you a significant amount of money, but it’s not necessarily a guarantee. As with most things in the world of credit, the potential costs and benefits depend on your individual situation and must be considered on a case-by-case basis.

If you are a typical consumer who has a few thousand dollars of credit card debt, then most of the time, it is probably fair to assume that a balance transfer could save you money if done correctly. That’s because many credit cards today have interest rates of 15% – 20% and often even higher, up to nearly 25%!

If you are paying that much in interest on any significant amount of credit card debt, then you could almost certainly save money by finding a balance transfer deal with a low interest rate and a low balance transfer fee.

However, it’s still important to crunch the numbers to make sure that a balance transfer is an option that makes sense for you. In order to easily determine whether a balance transfer could save you some money, you can use a balance transfer calculator.

Alternatively, if you’d rather do the math yourself, you can again use the credit card repayment calculator. Follow the steps below:

First, find out how much money it would take to pay off your debt without doing a balance transfer by entering the numbers that are applicable to your current credit card repayment scenario (i.e. the balance owed and interest rate of your current credit card and your expected monthly payment or ideal payoff time).
Then, enter the figures that would apply if you were to transfer your balance to a different card. For example, you could plug in the interest rate from a promotional balance transfer offer that you have been pre-qualified for. Also, don’t forget to add on the balance transfer fee to your balance owed in this scenario, which you can easily figure out as we described in the above section. Once you’ve done that, the repayment calculator can tell you how much money you would end up paying toward your debt if you were to transfer your balance.
Finally, compare the two results that you got in step 1 and step 2. If the number that you got in step 1 (your current repayment scenario) is lower than the number from step 2 (the balance transfer scenario), then that means you would pay less by staying the course with the repayment strategy you have now. If instead, the amount you calculated in step 2 is lower than the amount you calculated in step 1, then that indicates that a balance transfer with those parameters could save you money!

Comparing balance transfer offers and reading the fine print can help you decide whether a balance transfer will save you money in the end and which balance transfer card is best for you.

Beware of Retroactive Interest Rate Increases

One more important thing to consider when assessing the costs and benefits of a balance transfer is whether you will be charged retroactive interest if you cannot pay off the full balance by the end of the introductory low-interest period.

A retroactive interest rate increase means that you can be charged a higher interest rate on the balance you already transferred to the account in the past, back when you had a lower interest rate.

In other words, not only will you be charged interest on the balance that has not yet been paid, but you will also have to pay the higher interest rate “backdated” to the date you first transferred the balance—and on the original balance amount.

While it is rare for most major credit card issuers to charge retroactive interest, also called deferred interest, many retail store cards and some co-branded credit cards often do.

Although the Credit Card Accountability Responsibility and Disclosure Act (also known as the CARD Act) of 2009 banned banks from arbitrarily increasing credit card interest rates, retroactive rate hikes are still allowed if the contract you signed with your bank permits it.

Make sure to check the terms of your balance transfer card carefully so that you don’t get hit with a ton of surprise interest charges down the road. In addition, be aware that the banks are legally required to give you a minimum of six months at the introductory rate before they are allowed to ramp up the interest rate on your account.

Is a Balance Transfer Good for Your Credit?

In most situations, it is likely that a balance transfer can be beneficial to your credit, especially if you go the route of =opening a new credit card to which you can transfer your balance.

Opening a New Balance Transfer Credit Card

If you open a new balance transfer credit card, this can help your credit by adding available credit to your credit profile and thereby decreasing your overall utilization rate.

Opening a new account does have some drawbacks for your credit, such as the small negative impact of the hard inquiry and the reduction in your average age of accounts. These factors may hurt your score slightly. However, the benefit to your credit utilization will likely outweigh these factors, especially over time, as the impact of the inquiry diminishes and as you keep paying down your balance.

Transferring a Balance Between Existing Cards

The other balance transfer scenario is when you do not open a new balance transfer credit card, but rather, you transfer a balance between credit cards that you already own.

A balance transfer could potentially help both your individual and overall credit utilization ratios.Photo by Marco Verch, CC 2.0.

In this case, there is not as much potential to boost your credit score because you are not adding any additional available credit, which means your overall utilization ratio will stay the same. However, you may still be able to benefit by manipulating your individual utilization ratios.

As you know from our article about the difference between individual and overall utilization ratios, your individual utilization ratios can often be even more important than your overall utilization ratio. For this reason, if you max out even one credit card, that can have a significant impact on your credit.

If you can use a balance transfer to adjust your individual utilization ratios to more ideal levels, then this could improve your credit score. Let’s consider an example to help illustrate how this would work.

Example: Credit Card A has a $1,000 credit limit and is maxed out with a $1,000 balance, so it has an individual utilization ratio of 100%. Credit Card B has a $5,000 limit and no balance, so its utilization ratio is 0%.

What happens if we transfer the $1,000 balance from Card A to Card B?

Card A will then have a $0 balance and 0% utilization ratio, while Card B will then have a $1,000 balance and a 20% utilization ratio ($1,000 balance / $5,000 credit limit x 100% = 20% utilization).

Before the balance transfer, one of the accounts had a $0 balance and the other was completely maxed out. After the balance transfer, one account again has a $0 balance, but the other is only at 20% utilization, which is certainly a lot better than 100% utilization!

This example shows how it’s possible to use a balance transfer to improve the credit utilization portion of your credit score without actually changing the amount of debt you have.

If you’re considering trying this strategy, use our tradeline calculator to help you calculate both your individual and overall utilization ratios so that you can decide whether a balance transfer could help your credit utilization.

Do You Need Good Credit to Qualify for a Balance Transfer Credit Card?

Generally, good or excellent credit is needed in order to qualify for the best balance transfer offers, such as a long 0% APR introductory period and/or no balance transfer fees.

Generally, the best balance transfer offers are reserved for consumers with good or excellent credit.

According to NerdWallet, consumers who have good credit (i.e. a 690 or higher FICO score) might be able to qualify for a balance transfer card with an introductory 0% APR for a period of 12 to 18 months. Some cards may offer even longer introductory periods of up to 21 months.

In addition to having a high credit score, credit card issuers also want to see that you’re not already maxed out on all of your credit cards, which indicates to them that you are desperate for credit and may not be able to pay back all of your debt obligations.

Money Under 30 says that you’re most likely to get approved for a balance transfer card if you can get your overall revolving utilization ratio under 50%. Having at least a few years of credit age under your belt is also a good sign to lenders.

If you have fair credit (580 – 669 FICO score), then it will be more difficult to get a good balance transfer card. You may be able to qualify for a balance card transfer that doesn’t have all the perks of a balance transfer card for excellent credit. For example, it may have a shorter introductory period, a higher APR, or a higher balance transfer fee.

In this case, it’s even more important to do the math before going through with your balance transfer in order to make sure it will still save you money overall despite the fees.

Consumers who have a bad credit score are unlikely to qualify for a balance transfer credit card. Lenders don’t want to take on your debt if they think you are not likely to pay it back, which is what a low credit score indicates. However, there are other things you can do to reduce your credit card debt even if you have bad credit.

What to Do if You Can’t Get a Balance Transfer Card

If you’re not able to get approved for a new balance transfer credit card, don’t give up hope on paying off your debt. There are still a few options that may be a good fit for you.

Transfer Your Balance to a Card You Already Have

Check your existing roster of credit cards and see if any of them 1) have a lower interest rate than what you’re currently paying on your balance and 2) have enough available credit for a balance transfer. If the answer to both questions is yes, then it might be worth transferring your balance to the lower-interest card. However, you should always run the numbers first to be sure.

Get a Secured Balance Transfer Credit Card

Although the offers won’t be as appealing as those for excellent credit, it may be possible to qualify for a secured credit card with a lower introductory balance transfer APR than the rate you’re paying now. Keep in mind that you will need to have some cash on hand for the security deposit required for a secured credit card.

Having someone with good credit cosign with you may improve your chances of getting a better balance transfer offer.

Get a Co-Signer to Boost Your Chances of Approval

As you may recall from our article about “The Fastest Ways to Build Credit,” getting a co-signer with good credit can help you get approved for credit that you might have trouble qualifying for on your own.

If you can find a co-signer willing to accept responsibility for the debt if you cannot repay it, then you may have better chances of getting approved for a decent balance transfer card.

Get a Personal Loan to Pay Off Your Credit Card Debt

Another option for paying down debt with fair credit or bad credit is to apply for a personal loan and use the funds to pay off your credit cards, which is known as a debt consolidation loan. A debt consolidation loan allows you to combine all of your debt into one loan with one monthly payment and a lower interest rate.

However, personal loans for bad credit and fair credit can come with high interest rates and fees, so be sure to read the terms carefully before committing and steer clear of predatory lenders. In addition, watch out for loans that have prepayment penalties, especially if you know you’ll want to try to pay off your loan early.

Ask Your Credit Card Issuer for a Better Interest Rate

Don’t be afraid to call your credit card issuer and ask for a lower interest rate. Most people who request a better rate are successful!

One of the easiest credit hacks that can help save you money on interest and pay down your credit card debt faster is to call your credit card issuer and simply ask them for a lower interest rate. Make your case by explaining why you’ve been a good customer and why you feel that they should lower your rate.

Most people who do this are successful in getting a lower interest rate, so why not give it a try? One phone call could save you a significant amount of money on interest charges and help reduce your credit card debt burden.

Seek Credit Counseling and Create a Debt Management Plan

In extreme cases of credit card debt, it may be necessary to consider working with a credit counseling organization to create a debt management plan. With this option, a credit counselor can help you outline a plan to repay your debt and negotiate with your creditors on your behalf to lower your monthly payments and interest rate.

Keep Building Up Your Credit Score Until You Can Qualify for a Balance Transfer Card

Hopefully, you can use one or more of the above strategies to help make a dent in your debt repayment, but it’s also important to keep focusing on improving your credit over time. With time, patience, and good credit management, you may be able to qualify for a good balance transfer card in the future.

For more information on how to improve your credit score, visit the Credit Repair & Credit Score Information section of our Knowledge Center, where you can find many helpful articles such as “How to Increase Your Credit Limit,” “The Fastest Ways to Build Credit,” and “How to Get an 850 Credit Score.”

When Is a Balance Transfer a Good Idea?

A balance transfer is a good idea when you have determined that it will save you money in the long term and when you have a plan to pay off your balance in the time allotted.

Generally, balance transfers may be a viable option for those with less than $15,000 in debt who can also afford to repay the balance in 21 months or fewer, according to NerdWallet.

On the other hand, a balance transfer may not make sense if you don’t have very much debt or if the interest rate you are currently paying is already fairly low. In these cases, it may not be worth paying the balance transfer fee just to save a little bit of money on interest.

Another important step in deciding whether a balance transfer would be a smart financial move for you is to think about your own psychology and behavior patterns. If you think that having extra credit available to you as a result of a balance transfer may tempt you to spend even more on your credit cards, then a balance transfer may ultimately do more harm than good.

How to Make Sure a Balance Transfer Will Work for You

If you’ve decided that a balance transfer might be a good debt repayment strategy for you, follow these tips to avoid paying interest and ensure that your balance transfer actually saves money in the end.

Choose the right balance transfer credit card.

Choose a card that’s going to be a good fit for you. Look for one with no annual fee, a long 0% APR introductory period, and low balance transfer fees. Read the terms of the card closely and watch out for contracts that allow for retroactive or deferred interest charges.

Crunch the numbers first.

Instead of just assuming a balance transfer is always a good idea, you need to do the math first to ensure that you’ll actually come out ahead in the end.

Don’t miss any payments.

Becoming 60 days late on a payment could sabotage your promotional interest rate and land you with a high penalty APR instead. Not only that, but you would get a derogatory mark on your credit report. Set up automatic bill pay on your account so that you never miss a payment.

Make a plan to pay off your balance before the introductory APR expires.

The point of a balance transfer is to tackle your debt faster while saving on interest, but in order to do so, you need to be able to pay off your balance before the end of the 0% APR introductory period. Make a plan to finish paying off your debt before your interest rate goes up and do your best to stick to it, even if your cash flow is a little tight for a while.

Don’t spend on the balance transfer credit card—or your old card.

Although it might be tempting to use your new balance transfer card for purchases or to run up the balance on your old card again after clearing the balance from it, this is just going to make it even harder for you to get out of debt.

In fact, having extra available credit from opening a new credit card means you could potentially get yourself into an even bigger mess than you were in before.

If you can’t pay off your balance by the end of the introductory period, consider whether you might want to do another balance transfer to a different card.

If you’re going to use a balance transfer as a way to help you pay off debt, then you first need to make sure you have addressed the spending habits that got you into debt in the first place, or the strategy could backfire and end up costing you more instead of saving you money.

If you don’t finish paying off your balance by the end of the promotional period, consider transferring your balance again to another 0% interest card.

Even the perfect plan can go awry when something unexpected happens, such as if you lose your job and can’t pay as much toward your debt as you would like. In other cases, your balance may simply be too large to realistically pay off during the introductory period.

Either way, if for some reason you aren’t able to finish paying off your balance by the end of the introductory promotional offer, then you may want to consider taking advantage of another 0% APR balance transfer offer. This will allow you to have some additional time to pay down your balance without accumulating interest.

Conclusion: Is a Balance Transfer Worth It?

A balance transfer can be a valuable option for those in the process of paying down high-interest debt. It could help you consolidate your payments, save money on interest, and chip away at your debt faster.

However, it’s not an instant cure-all for credit card debt.

You need to change the behaviors that got you into debt before looking into a balance transfer, otherwise, you might end up right back where you started, or even worse off than you were before.

If you do choose to do a balance transfer, it’s imperative to read the fine print, be aware of the terms of your balance transfer offer, and have a realistic strategy in place for paying off the balance.

For a quick summary of the main points of this article, check out NerdWallet’s video about balance transfers below.

Read more: tradelinesupply.com

At What Age Can You Start Building Credit?

December 23, 2019CreditBy toptierfinancial

There’s never a bad time to start building good credit, but there is definitely a good time to start: as early as possible. The earlier someone starts building credit, the easier it will be to seek credit as an adult. The question is: at what age can you start building credit?

Whether you want to start building your own credit or whether you want to help your child get a head start on preparing for their financial future, this article is for you. We answer the questions of when you can start building your credit, how to build credit for a minor, and how to build your child’s credit.

Why You Should Start Building Credit Young

Obviously, most children and teenagers don’t have access to credit cards or other credit products, for good reason. However, this doesn’t mean that teens cannot or should not build credit. In fact, quite the opposite is true.

Let’s look at an example to understand why it’s important to start building credit even before turning 18. If you’re an adult and you’ve never used credit before, but you now need an auto loan, what do you think is going to happen when you go and apply for a loan?

Since you don’t have a credit history, chances are, you’re probably going to get denied. If you do somehow get approved for an auto loan with no credit, it’s likely going to have a very high interest rate since you will be perceived as a risky borrower.

The moral of the story is that you can’t wait until you need credit to start thinking about building credit. You need to start building up a positive credit history early on so that you can have that good credit to rely on when you eventually end up needing it.

Beyond the issue of having access to credit when you need it, having good credit may also be important when entering the workforce. Many employers conduct background checks and check the credit reports of prospective hires, and having a solid credit history will reflect positively on applicants.

Having already established good credit will also come in handy when shopping for insurance, applying to rent a home, setting up utilities, and maybe even buying a cell phone plan. All of these industries typically conduct credit checks on applicants before getting into business with them.

How Do You Start Building Credit?

To build credit, of course, you need to use credit products. This is why many people wait until they are well into adulthood to try to start building credit, which, as we just learned above, is a mistake because it can hold you back when you actually need to get credit.

However, we all know how difficult it can be to get approved for credit when you don’t have yet have a credit history that shows creditors that you can manage credit responsibly. Lenders don’t want to take on the risk of lending to someone whose future behavior is hard to predict.

Secured credit cards, which require a security deposit as collateral, can be one way to start building credit.

So how do you start building your credit without a credit history? One option is to apply for a secured credit card, which involves putting down a security deposit as collateral against the credit limit of your card. Lenders can issue these cards to consumers with no credit without taking on as much risk since they can keep the deposit if you default on payments. [Disclosure: This article contains affiliate links.]

Another strategy is to apply for a credit-builder loan, which works in the reverse order of a traditional loan: first, you make all the monthly payments toward the balance of the loan; then, once you have finished making the payments, you receive the loan disbursement.

Since you have already fronted the money, lenders don’t have to face the risk of you not being able to pay back the loan. Because of this, as long as you have enough income to make the monthly payments, your chances of getting approved for a credit-builder loan are very high.

There’s an easier way to start building credit, though. If you can’t get approved for any primary accounts on your own, or if you want a “shortcut” to building credit without having to wait for your primary accounts to age, you can build credit fast by piggybacking on someone else’s credit.

Piggybacking simply means becoming associated with someone else’s credit account for the purpose of building credit. There are three ways to piggyback, which you can also see in our infographic:

Get a cosigner or guarantor who can be held responsible for the debt if you cannot pay it.
Open a joint account with someone who has good credit and can help you get approved for the joint account.
Become an authorized user on someone else’s seasoned tradeline that is in good standing.

The first two of these three piggybacking methods involve opening new primary accounts, which means you have to wait a few years for the accounts to gain seasoning before they start to help your credit in a more significant way.

On the other hand, piggybacking as an authorized user means you can be added to an account that already has plenty of age and on-time payment history. That’s why it’s one of the most convenient ways to start building credit fast.

How to Help Your Child Build Credit

Teach your child about credit before they get a credit card so they don’t make the mistake of getting deep into debt.

Unfortunately, financial literacy is usually not emphasized in schools, so the responsibility of educating children about credit and helping them build credit falls primarily to parents and guardians.

It’s important to not only know how to help build your child’s credit but also to teach them the basics of financial literacy so that they will one day be able to manage their finances and their credit on their own.

Lay a solid foundation by teaching them about budgeting and saving. If your child is old enough to work, that can be a good opportunity to see how they manage their income.

Then you can move on to the world of credit. Your child needs to have an understanding of how credit works before getting a credit card or they could be headed for disaster.

In a survey of college students conducted by U.S. News in August of 2019, about 35% of students surveyed said they were not taught about fundamental financial topics before getting a credit card. A lack of understanding about how credit works and how to use it responsibly can easily lead to getting deep into debt and a lifetime of financial troubles.

In the same survey, 13% of students said they had over $8,000 in credit card debt, and almost 23% said they didn’t even know how much credit card debt they had. No one wants that to happen to their child, so make sure your kid knows how to use credit cards properly before they get one.

But beyond teaching your child the fundamentals of credit, can you build your child’s credit even before they get a credit card or loan of their own?

How to Build Your Child’s Credit Score by Piggybacking Credit

While helping them learn the ins and outs of the credit system, it’s also smart to help them get a head start on actually building credit via credit piggybacking, which means becoming associated with another person’s credit account.

If you have good credit, consider adding your child at an early age as an authorized user to one or more of your credit cards that are in good standing. If they’re not yet ready to use the account responsibly, you don’t necessarily have to give them access to a credit card. Alternatively, if you want to let them use a credit card, some credit card issuers may allow you to set spending limits for authorized users.

Piggybacking credit can help your child build credit early in life.

Being an authorized user on the account will still help them even if they don’t have spending privileges on the card. The positive payment history of that account will usually be reported on the authorized user’s credit profile, which can help kick start their credit score.

Unfortunately, according to the U.S. News study, about 75% of the college students that participated in the survey said they did not become an authorized user on someone else’s account before getting their own credit cards. That means they likely missed out on the lower interest rates and other perks that come with having an established positive credit history.

This statistic is not surprising. As we learned in our article, “What Happened to Equal Credit Opportunity for All?” equal credit opportunity is sadly not a reality in our country. Wealth disparities and historical discrimination prevent many Americans from being able to establish good credit and get ahead in life.

Those with wealth and financial education commonly used the authorized user piggybacking strategy to help their children build credit, while at the same time there are many young people who don’t have parents or loved ones that can help them establish credit. The tradeline industry helps to address this problem by providing access to authorized user tradelines to all consumers.

It’s clear that the authorized user strategy is an ideal way to help your child build credit. But when can you actually start building credit? Is there a minimum age requirement to be an authorized user? Can you start building credit before 18, for example?

At What Age Should You Start Building Credit?

It can be difficult for young adults to get approved for a credit card on their own since credit card issuers are required to check applicants’ income before issuing them credit. However, by using the authorized user credit piggybacking strategy, young people can start building credit earlier than you may think.

Minimum Age for Authorized User on Credit Card

Many credit card issuers have no minimum age requirement for authorized users.

A survey by creditcards.com revealed that half of the major credit card issuers surveyed, including Bank of America, Capital One, and Chase, had no minimum age requirement for authorized users! That means that with many of the most common credit cards, you can add your child as an authorized user at any age.

Credit card companies that do have age requirements, such as American Express, Barclays, Discover, and US Bank, typically impose a minimum age limit that is between 13 to 16 years old.

Check with your credit card issuers to see what the minimum age requirement is for authorized users on your cards.

In addition, check with your credit card issuers to see whether they report authorized user information to the credit bureaus since not all banks do. If you’re purchasing a tradeline, however, you don’t have to worry about that, since all of the banks we work with do report to all three major credit bureaus.

Conclusion

It’s a smart idea to help your child build credit early so they can start their adult life on a financially sound footing. If you have good credit yourself, the easiest and fastest way to build your child’s credit is by adding them as an authorized user to one or more of your credit cards that have a perfect payment history.

Kids can become authorized users at any age with some credit cards, while there is a minimum age requirement of 13 to 16 years with other cards. Check to see what your bank’s policy is.

Unfortunately, many people do not have access to this credit-building strategy. If you are one of those people, consider purchasing a seasoned tradeline when it comes time for your child to start establishing a credit history.

It’s never too early to start building good credit!

Did your parents teach you about credit at a young age? How do you plan to help your child build credit? Share your thoughts below!

Read more: tradelinesupply.com

Easy Credit Hacks That Will Actually Get You Results

December 21, 2019CreditBy toptierfinancial

Credit repair can be a long and arduous process, especially if you have very bad credit. Getting results from credit repair can take months, and it takes years to build or rebuild a solid credit history.

However, there are some “credit hacks” that you can use to improve your credit on a much shorter time scale.

In this article, we’re going to tell you the best credit hacks to improve your credit score as well as credit card hacks that work to help you save you money on interest. In addition, we’ll also provide some credit-building hacks for those with thin credit files and credit repair hacks to help you fix bad credit.

Here are the credit hacks we’ll be covering in this article. You can click on the bulleted list items below to jump directly to each hack.

Pay down high-balance cards first to improve your credit utilization
Pay off low-balance accounts to reduce the number of accounts with balances
Time your payments so that you have a $0 balance on your statement date
Build credit fast by piggybacking on someone else’s good credit
Consider applying for a credit-builder loan
Increase your credit limit
Ask your credit card issuers for lower interest rates
Set up automatic bill payments
Pay down high-interest balances first to save money on interest and pay off debt faster
Transfer your balance to a card with a lower interest rate
Dispute inaccurate information on your credit report (such as inquiries or derogatory items)
Delete collections from your credit report
Time your credit inquiries carefully when shopping for credit
Get a rapid rescore from your mortgage lender
Manually update your credit report yourself

Now let’s delve deeper into each credit of these credit hacks.

Credit Score Increase Hacks

Pay down high-balance cards first to improve your credit utilization

If your focus is primarily on boosting your credit score fast, you may want to consider paying down your high-balance cards first. The reason for this can be explained by the importance of individual credit utilization ratios, which refers to the utilization ratios of each of your revolving accounts.

From what we have seen, individual utilization ratios may be even more important than your overall utilization ratio. Having one or more maxed-out accounts, for example, can drag down your score even if your overall utilization ratio is low.

Therefore, by paying down your high balances first, you can get those accounts out of the high-utilization danger zone and into a utilization range that is less damaging to your credit score.

Pay off low-balance accounts to reduce the number of accounts with balances

One of the factors that are considered within the overall “credit utilization” category is the number of accounts that have balances. Having fewer accounts with balances is better for your score. In fact, the ideal credit utilization scenario is having a zero balance on all but one of your accounts and having one account with a utilization ratio in the 1-3% range.

Therefore, if you can pay some of your accounts down to zero, you should see a boost to your score. Accounts with small balances are low-hanging fruit because you don’t have to spend as much money to get them to a zero balance.

You can read more tips on how to improve your credit utilization in our article about utilization ratios.

Time your payments so that you have a $0 balance on your statement date

To ensure that your credit report shows low credit utilization, time your payments so that you have a low balance (or no balance) when your accounts report to the credit bureaus.

When it comes to credit utilization, you might think that as long as you pay your credit card balance in full by the due date every month, then you should show a 0% utilization for that account. However, this assumption is not necessarily correct. The reason for this is that the date when your credit card issuer reports to the credit bureaus is often not the same as your due date.

That means that your account is reporting at some other time during the month when your card does have a balance on it. If you use a significant portion of your credit limit, that utilization could be hurting your score.

To correct this, if you want to have your accounts show a 0% utilization ratio, try using this credit hack: Instead of waiting for your statement to arrive and then paying your balance on the due date a few weeks later, you need to pay your balance to $0 before the statement closing date. Then, your statement will close with a $0 balance and that’s what will report to the credit bureaus.

Alternatively, you can pay your bill on your normal schedule and then refrain from using your card for the next entire billing cycle. Since you have paid off the balance and not made any new charges, your account will show a $0 balance at the end of the reporting cycle.

Either way, if you can shift the timing of your payments so that your account reports a 0% utilization, that could provide a significant benefit to the credit utilization portion of your credit score.

Credit-Building Hacks

Build credit fast by piggybacking on someone else’s good credit

One of the easiest and fastest ways to build credit is called credit piggybacking, which refers to the practice of becoming associated with someone else’s good credit for the purpose of helping you build your own credit history.

Piggybacking credit can help you build credit quickly, whether you open a joint account, get a cosigner, or become an authorized user.

There are three main ways to piggyback credit.

Get a co-signer or guarantor

Having a co-signer or guarantor with good credit can go a long way toward helping you qualify for credit because the co-signer or guarantor is essentially promising to assume responsibility for the debt if you default.

The downside of this strategy is that since the position of the co-signer or guarantor comes with a lot of risks, it can be difficult to find someone to take on this role for you.

Open a joint account

Since both applicants are considered when opening a joint account, you can benefit from your partner’s good credit as well as the fact that the income of both applicants can be counted. If you maintain the joint account for a while, this can allow you to build up a credit history with a primary account.

However, many banks no longer offer joint credit cards, so your options for opening a joint account may be limited. Plus, if your relationship with the other account holder ever takes a turn for the worse, it can make managing the account difficult, and you may end up needing to close the account altogether.

Become an authorized user

Becoming an authorized user on a seasoned tradeline (i.e. a credit account that already has at least two years of positive payment history associated with it) is the fastest way to build credit. Instead of opening your own primary account and waiting for it to age, you can add years of credit history to your credit profile within a few weeks or even days.

Consider applying for a credit-builder loan

If you have bad credit or if you have never used credit before, you might be feeling discouraged about the prospect of getting credit anytime soon. It can feel impossible to get credit if you have a thin credit file or a history of derogatory marks on your credit report.

A credit-builder loan can be a useful tool for those struggling to build credit. Here’s a summary of how they work:

Credit-builder loans are typically for small amounts (e.g. a few hundred to a thousand dollars).
A credit-builder loan functions like a backward version of a traditional loan: instead of receiving the funds upfront and paying the money back later, you first make all of the monthly payments and then receive the loan disbursement once you have already paid off the loan.
For this reason, these types of loans are low-risk for lenders, which is why even those with bad credit or thin credit can still qualify (provided your income is sufficient for you to make the monthly payments).
The lender reports your payment history to one or more of the major credit bureaus, which allows you to build a credit history.

For more information on how these loans work and whether a credit-builder loan might be a good strategy for you to consider, check out our article, “Credit-Builder Loans: Can They Help You?”

Credit Card Hacks

Increase your credit limit

Increasing your credit limit is one of the best credit hacks. Check out our article for more tips on how to request a credit line increase.

Increasing your credit limit can be one of the easiest and fastest ways to boost your credit score. However, you’ll want to strategize a little before requesting credit line increases from your lenders.

You can read more in our article on the topic, but here’s a quick rundown of how to increase your credit limit:

If your financial situation has improved since opening your credit cards, it might be a good time to request a credit line increase. For example, if you have received a raise at work or your credit score has increased, that could indicate to lenders that you can handle a higher credit limit responsibly.
Wait until you have been a responsible cardholder for at least six months and you don’t have too many inquiries on your credit report to make your request. Also, don’t request an increase if you have already requested one within the past six months.
Check with your credit issuer to see whether they will need to do a hard inquiry or soft inquiry. If you don’t want to get a hard inquiry on your credit report, ask if there is an amount they may be able to approve without doing a hard pull on your credit.
You can make your request for a credit limit increase online or over the phone. Be prepared to provide some financial information and to explain why you are asking for additional credit. Calling your bank and talking to a representative may give you more opportunities to negotiate than if you make the request online.

So, how does this hack improve your credit score?

Your credit utilization ratio, also called your debt-to-credit ratio, makes up about 35% of your FICO score and about 20% of your VantageScore. It’s defined as the ratio of how much debt you owe to the amount of credit you have available. This can be calculated for your revolving credit accounts in aggregate by adding up all of your balances and dividing by the sum of all your credit limits for those accounts.

Increasing your credit limit improves both your overall and individual utilization ratios, thus helping your credit score.

Ask your credit card issuers for lower interest rates

This is another credit card hack that is easier and quicker than you might think. All you need to do is call up each of your credit card issuers and ask them to lower your interest rate.

Try calling your credit card issuers and asking for lower interest rates—odds are good that they will grant your request.

Again, you’ll want to do a little homework before asking for a lower interest rate. Research interest rates on cards from other issuers and see if your bank can match a lower number. Explain why you’ve been a good customer and why you feel your rate should be lowered. Also, describe how your financial situation may have improved since you opened the card.

You can find a detailed script to help you negotiate on creditcards.com.

Although this tip doesn’t directly affect your credit score, it can still be hugely beneficial, especially if you are one of the 37% of American households that carry balances on their credit cards from month to month.

Lowering your interest rate decreases the debt burden that comes from interest charges each month, allowing you to pay off your debt faster. Paying off your debt faster means improving your utilization ratio, which leads to a better credit score!

Although this hack isn’t guaranteed to work, the worst that could happen is that your lenders deny your request and your interest rates stay the same. On the other hand, it could save you hundreds or even thousands of dollars in interest. Plus, you can be optimistic about your chances: polls show that over three-quarters of consumers who ask for a lower interest rate are successful in their request.

Set up automatic bill payments

Setting up automatic payments is one of the best things you can do for your credit, especially if you struggle to remember due dates or if you have accidentally missed payments in the past. Payment history is the number one factor that influences your credit score, so even one late payment can have a serious impact on your credit.

Setting up automatic payments for all of your accounts can help prevent you from accidentally missing a payment.

Take human error out of the equation by setting up automatic payments for all of your loans and credit cards. That way, you’ll never accidentally miss a payment, so you can continue to build up a positive payment history each month without even thinking about it.

Pay down high-interest balances first to save money on interest and pay off debt faster

When it comes to paying off debt, the way to save the most money on interest is to pay off your high-interest balances first. This method is called the “debt avalanche” because you’re starting with the highest interest rates and working your way down from there. (In contrast, the “debt snowball” method involves paying your debt in order of smallest to largest balances).

As with the previous hack, by saving money on interest, you can chip away at your credit card debt faster, decreasing your credit utilization and increasing your credit score.

Transfer your balances to a card with a lower interest rate

Another popular way to get some relief from paying those astronomical interest charges every month is to transfer your credit card balances to another credit card that has a lower interest rate.

This hack works best if you have good enough credit to qualify for a balance transfer credit card. These credit cards are marketed specifically for this purpose and they typically come with special introductory offers, such as 0% APR on balance transfers for a certain number of months.

A balance transfer can help you save money on interest charges and may improve your credit utilization ratio.

Here’s how the balance transfer process works:

When you apply for the balance transfer credit card, you tell the credit card issuer the amount you want to transfer and which bank(s) you want to transfer a balance from.
Once you have been approved for the balance transfer card, the credit card issuer essentially pays off your balances at the other banks with the credit on your new card.
Your debts (plus a balance transfer fee, usually around 3-5%) have thus been transferred to your new card.
Since your balance transfer card likely has a low promotional interest rate or perhaps even zero interest for a while, you have some extra time to pay off your debt without being crushed by interest, which means you can pay off your debt faster.

As a bonus, this credit card hack can also help your credit utilization, because you are adding some available credit to your credit profile by opening a new account.

The pitfall to watch out for with this method is that it opens up the possibility of you running up your credit cards again and potentially ending up even deeper in debt than you were before. If you think having access to additional credit is going to tempt you to spend more, then it’s probably best for you to avoid this credit hack.

Credit Repair Hacks and Bad Credit Hacks

Dispute inaccurate information on your credit report (such as inquiries or derogatory items)

Check your credit report for errors that could be damaging your score and dispute them with the credit bureaus.

If you have any errors on your credit report that are bringing your score down, such as credit inquiries or derogatory items that don’t belong to you or are otherwise being reported incorrectly, then this hack could definitely give your credit a boost.

First, you need to obtain a copy of your credit report to check for errors. You can order one from each of the three credit bureaus for free once a year at annualcreditreport.com and you can order your Innovis credit report for free directly from their website.

Then, thoroughly check your credit report for any inaccuracies, such as late payments that you actually made on time, duplicate accounts, or negative information that is more than seven years old (which means it should have been deleted by the credit bureaus already).

To fix the errors on your credit report, you can dispute the items with the credit bureaus by following the instructions found on each of your credit reports. However, there are a couple of other things you should keep in mind in order to ensure your dispute process goes smoothly.

Look up a sample credit dispute letter, such as the sample letter offered by the Federal Trade Commission, that you can use as a model for writing your own letters.
Write one dispute letter for each credit report error and send in your letters one at a time. If you try to dispute several items at once, you run the risk of the claim being dismissed as “frivolous.”
Be sure to include as much evidence as possible that supports your claim when submitting your dispute. Without documentation proving that the item is being reported incorrectly, the credit bureaus could dismiss your dispute.
Send your letters along with the necessary documentation via certified mail so that you can get proof that the bureaus received them.
In addition, you should also talk to the creditor that is reporting the inaccurate date to the credit bureaus in order to fix the problem at the source and prevent the error from showing up on your credit report again in the future.

Once the credit bureaus receive your dispute letters, they have 30 days to investigate the issue. If they cannot verify the information to be accurate, then they have to either update the item with the correct information or remove the item from your credit report.

For more information on the types of credit report errors to watch out for and how to fix them, see “How to Fix the Most Common Credit Report Errors.”

Delete collections from your credit report

For this credit hack, dispute collection accounts on your credit report that are inaccurate or outdated to have the credit bureaus update them or delete the collections altogether.

If you have collection accounts on your credit report, it may be possible to get them deleted, depending on the circumstances.

As we discussed above, if a collection account on your credit report is being reported incorrectly or doesn’t belong to you, then you can certainly dispute the inaccurate information and have the credit bureaus update or remove the item.

If, on the other hand, the collection accounts on your credit report are legitimate, then your options for removing them are limited.

Some consumers try to negotiate a “pay for delete” arrangement with the debt collector, in which the debt collector agrees to stop reporting the collection to the credit bureaus in exchange for you paying some or all of the debt. However, this strategy is risky and it does not always work in the consumers’ favor. If you do try this approach, be sure to get the agreement in writing from the collection agency.

In addition, deleting a paid account might not even increase your credit score depending on which credit scoring algorithm is being used. Simply paying the collection may be enough to boost your credit score, since some scoring models (FICO 9, VantageScore 3.0, and VantageScore 4.0) don’t penalize you for having paid collections on your credit report.

If you want to delete a collection account without paying it, unfortunately, your only legitimate option is to wait for the collection to be removed from your credit report automatically, which happens seven years after the date that you were first delinquent on the account.

If you’re concerned about collections on your credit report, definitely make sure to check out our ultimate guide to collection accounts.

Credit Report Hacks

Time your credit inquiries carefully when shopping for credit

If you’re planning to shop for credit in the future, you’ll probably be getting some hard inquiries from lenders on your credit report.

Lenders typically need to check your credit history before they can decide whether or not to extend you credit, so when you apply for a loan or credit card, the lender will often request a “hard pull” of your credit report from one or more of the credit bureaus.

While it’s unlikely that inquiries alone will ruin your credit score, since each inquiry can potentially subtract a few points from your credit score, it is still important to be mindful of the frequency and the timing of your credit applications in order to minimize the impact of inquiries on your credit report.

Thankfully, though, you can still shop around for the best loan without being punished by the credit scoring algorithms. FICO and VantageScore know that it’s financially smart to shop for the best rates, not risky. Therefore, they each have ways of accounting for this behavior so that your loan applications don’t have an outsize impact on your credit score.

When applying for credit, try to minimize the impact of credit inquiries by grouping your applications within a specific time frame.

FICO scores group together inquiries that occur within a certain time frame for student loans, auto loans, and mortgages. Older FICO scores allow a 14-day window for consumers to apply for multiple loans of the same type (such as mortgages), while newer FICO scores allow a 45-day window.

Each inquiry for the same type of loan within the given time period gets grouped together and only counted as a single inquiry. However, note that this rule does not apply to credit cards, for which each inquiry will be counted separately.

With VantageScore, all inquiries that are made with a 14-day period are grouped together, regardless of the types of accounts—even credit cards.

To simplify this information into a general rule, if you can complete all of your hard credit inquiries for a given type of loan within 14 days of each other, then the inquiries will be grouped together and you can avoid ending up with way too many inquiries on your credit report.

Get a rapid rescore from your mortgage lender

Once you’ve tried some of these credit hacks and optimized your credit report, the fastest way to see your results reflected in your credit score is to get a rapid rescore. For those who are about to apply for a mortgage but need to quickly update their credit report first, a rapid rescore can be an extremely valuable tool.

Find out more about rapid rescores in “This Is How a Rapid Rescore Can Boost Your Credit Score Fast.”

Manually update your credit report yourself

To trigger a manual update of your credit report, obtain verification of your tradeline’s new status from your creditor and then forward the letter to the credit bureaus.

Since rapid rescores can only be provided by mortgage lenders, if you’re not in the market for a mortgage but you need to update your credit report in a hurry, you’ll need to update your tradelines manually.

To do so, once you have made the desired changes to your tradelines (e.g. paying down your balances or correcting errors), contact your creditors and ask them to send you a letter verifying the new account information. Then, forward this letter to the credit bureaus so they can update the information in your credit report.

By initiating the update manually, you can bypass the period of time that you would otherwise have to wait until your next reporting period.

Conclusions on Hacks to Improve Your Credit

While there is no substitute for the time and effort required to establish and maintain a respectable credit history, that doesn’t mean that you can’t try some of these credit-boosting hacks to help you improve your credit right away and perhaps even save some money on credit card interest and fees.

Just make sure not to lose sight of the most important goal, which is to build good credit over time and keep your credit report in good condition long-term.

Let us know what you think of these credit hacks! Which are the best credit hacks in your opinion? Do you have any creative credit hacks that you would add to this list?

Read more: tradelinesupply.com

What Is the Difference Between Individual and Overall Credit Utilization Ratios?

December 11, 2019CreditBy toptierfinancial

What is the difference between your overall credit utilization ratio and individual utilization ratios and why does it matter to your credit? Keep reading to find out.

Credit utilization makes up 30% of a FICO score.

What Is Credit Utilization?

To put it simply, credit utilization is the amount of debt you owe compared to the amount of your available credit. In other words, it is the amount of your available credit that you are actually using.

In terms of your credit score, credit utilization makes up 30% of your score, second only to payment history.

The reason credit utilization is such an important part of your credit score is that the ratio of debt someone has is highly indicative of whether they will default on a debt in the future. The more you owe, the harder it becomes to pay off all that debt on time every month, which makes you a riskier bet for lenders.

Components of Credit Utilization

According to FICO, there are several components that fall within the category of credit utilization, such as:

The total amount you owe on all accounts (overall utilization)

The amount you owe on different types of accounts

The utilization ratios of each of your revolving credit accounts (individual utilization)

The number or ratio of your accounts that have balances

The amount of debt you still owe on your installment loans (e.g. mortgages, auto loans, student loans)

What Is the Difference Between Individual and Overall Utilization?

Your overall utilization ratio is the amount of revolving debt you have divided by your total available revolving credit.

For example, if you have one credit card with a $450 balance and a $500 limit and a second credit card with a $550 balance and a $3,500 limit, your overall utilization ratio would be 25% ($1,000 owed divided by $4,000 available credit).

However, the individual utilization ratios of your respective credit cards are 90% ($450 balance / $500 credit limit) and 16% ($550 balance / $3,500 credit limit).

Since credit scores consider individual utilization ratios, not just overall utilization, having any single revolving account at 90% utilization is going to weigh negatively on the credit utilization portion of your score.

Overall Utilization May Not Be as Important as You Think

Typically, when people think of the effect that credit utilization has on credit scores, they often assume that overall utilization is the only important variable.

By this assumption, it would be fine to have individual accounts that are maxed out as long as the overall utilization is still low.

Individual utilization ratios may be more important than the overall utilization ratio.

However, we have seen that this is often not true.

For example, sometimes clients with maxed-out credit cards will buy high-limit tradelines in order to reduce their overall utilization ratio, but then they don’t see the results they were hoping for.

This means that the individual accounts with high utilization are still weighing heavily on the clients’ credit scores, despite the fact that they have improved their overall utilization. In other words, the decrease in the overall utilization ratio did not make much of a difference.

Cases like this seem to indicate that overall utilization may not play as big a role as traditional wisdom has led us to believe and that the individual utilization ratios may be more important.

This is one of the reasons why we typically suggest that consumers focus on the age of a tradeline rather than the credit limit. Although people tend to gravitate toward high-limit tradelines, the age of a tradeline is actually more powerful in most cases, especially considering that lowering one’s overall utilization ratio may not help very much.

How Do Tradelines Affect Credit Utilization?

Although the age of a tradeline is often its most valuable asset, tradelines can still help with some of the credit utilization variables.

Since our tradelines are guaranteed to have utilization ratios that are at or below 15%, this means that at least 85% of that tradeline’s credit limit is going toward your available credit, which helps to lower your overall utilization ratio. In fact, most of our tradelines tend to maintain utilization ratios that are much lower than 15%.

Buying tradelines also allows you to add accounts with low individual utilization to your credit file, which can help to improve the number of accounts that are low-utilization vs. high-utilization.

Before buying tradelines, see where you stand currently by using our credit utilization ratio calculator. You can also use the credit utilization ratio calculator to see how your overall utilization ratio could be affected by adding new tradelines.

What Is the Ideal Utilization Ratio?

As a general rule of thumb, simply aim to keep your utilization as low as possible. However, you might be surprised to learn that having a zero balance on all revolving accounts is actually not the best scenario for your score.

According to creditcards.com, “…the ideal scenario tends to be having all but one card show a zero balance (zero percent utilization) and having one card with utilization in the 1-3 percent range.”

The average credit utilization ratio of consumers who have an 850 FICO score is about 4%.

Why? As it turns out, consumers with a 0 percent utilization ratio actually have a slightly higher risk of defaulting than those with low (but more than 0) utilization. A 0 percent utilization indicates that a consumer may not use credit regularly, which leads to the consumer having a higher risk of default in the future.

However, your utilization doesn’t necessarily have to fall in line with the above scenario in order to have a perfect credit score. In “How to Get an 850 Credit Score,” we found that consumers with FICO credit scores of 850 have an average utilization rate of 4.1%.

For those of us who use credit regularly, however, maintaining a minuscule balance may not always be practical. So what is a realistic threshold to shoot for?

While you may hear the figure 30% cited frequently, many credit experts say this is a myth and that you should aim for 20%-25% instead.

Tips to Avoid Excessive Revolving Debt Utilization

Spread out your charges between different cards

Since we have seen that it’s important to keep individual utilization ratios low, one strategy to accomplish this is to make your purchases on a few different credit cards instead of charging everything to one card. Spreading out your charges helps to prevent an excessively high balance from accumulating on any one individual card.

Pay off your balances more frequently

If you spend a lot on one of your cards, consider spreading out your charges between different cards or paying down the balance more often.

If you do spend a lot on one card, it helps to pay off your balance more than once a month. If your card reports to the credit bureaus before you have paid off your balance, it will show a higher utilization than if you had paid some or all of the balance down already.

You can either time your payment to post just before the reporting date of your card or you can make payments several times per month. Some people even prefer to pay off each charge immediately so their card never shows a significant balance.

Set up balance alerts to monitor your spending

To prevent mindless spending from getting out of control, try setting up balance alerts on your credit card. Your bank will automatically notify you when the balance exceeds an amount of your choosing, so you can back off of spending on that card or pay down your balance.

Don’t close old accounts

Even if you don’t use some of your old credit cards anymore, it’s often a good idea to keep the accounts open so they can continue to play a positive role in your overall utilization ratio and the number of accounts that have low utilization vs. high utilization.

Ask for credit limit increases

Another way to decrease your utilization ratios is to call your credit card issuers and ask them to increase your credit limit. By increasing your amount of available credit, you decrease your utilization ratio, both on individual cards and overall.

Keep in mind that your bank may do a hard pull on your credit to decide whether or not to grant your request, which could ding your score a few points temporarily. However, the small negative impact of the credit inquiry could be offset by the benefit of the credit line increase.

Also, this might not be an ideal strategy if you think you will be tempted to spend the new credit available to you, which could leave you even worse off than you started.

If you want to learn more about how you can successfully ask for credit line increases, check out our article, “How to Increase Your Credit Limit.”

Open a new credit card

Like asking for a higher credit limit, opening a new credit card can also lower your credit utilization, provided you leave most of the credit available.

Again, this will add an inquiry to your credit report, as well as decrease your average age of accounts, so this could have a negative impact on your score temporarily, which may be outweighed by the decrease in your credit utilization.

Transfer your credit card balances to different cards

A balance transfer is when you use available credit from one credit card account to pay off the balance on another credit card, thus “transferring” your debt balance from one card to another.

There are two ways to do this: you can transfer a balance to another credit card you already have, as long as it has enough available credit, or you can transfer a balance by applying for a new credit card and letting the card issuer know in your application which account you want to transfer a balance from and how much you want to transfer.

The latter option is best for your credit utilization, since opening a new credit card means you are adding available credit to your credit profile. In addition, it gives you the opportunity to apply for specific balance transfer credit cards, which usually come with low promotional interest rates on the balances you transfer.

However, using an existing account to do a balance transfer can still be beneficial if done properly, because it can help your individual utilization ratios. Just make sure the account you are transferring the balance to has a higher credit limit than the account that is currently carrying the balance in order to keep the individual utilization ratios as low as possible on each account.

Pay down smaller balances to zero

Having too many accounts with balances can bring down your score since credit scores consider the number of accounts in your credit file that are carrying a balance. If you have any accounts with smaller balances, paying those down to zero will decrease the individual utilization ratios on those accounts, reduce your overall utilization ratio, and reduce the number of accounts with balances, thus improving your credit profile in multiple ways.

Read more: tradelinesupply.com

Do Federal Laws Really Help Me Establish Credit?

December 4, 2019CreditBy toptierfinancial

In the world of consumer credit, there are a number of Federal laws or “statutes” which help consumers in regards to their personal credit. Two such notable statutes are the Fair Credit Reporting Act, more commonly referred to as the “FCRA”, and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, more commonly referred to as the “CARD Act.”

Both of these laws are consumer protection statutes, meaning they were designed to protect consumers from supposed big bad industry players. But do they really help consumers to better manage or even to establish or re-establish credit? If you dig deeper into the fine print of some of the so-called “protections” you might answer, “no.”

The Fair Credit Reporting Act

The FCRA has been around since the early 1970s, is some 90 pages long and has been amended dozens of times. In the world of consumer credit reporting, the FCRA is essentially the Bible. The FCRA is best known for providing the following protections to consumers, complete with its shortcomings;

Right to free credit reports: Since 2003 every U.S. citizen with credit reports has had the right to see those credit reports at no cost once every 12 months. The website where you can claim those Federal freebies is www.annualcreditreport.com. I’ve often made the point that while “once every 12 months” may have made sense in 2003, it doesn’t make sense in 2019. Given the number of large-scale data breaches and expanding consumer awareness of credit reporting it seems like once every 12 months has become insufficient.

You have the right to dispute inaccurate information on your credit report.

Right to dispute: If you believe something on your credit reports is incorrect, you have the right to dispute that information, for free. When you dispute the information the credit reporting agencies and the companies that furnished the information must perform a reasonable investigation. Many years ago I was critical of this process, but my stance has evolved.

The dispute process has become much more consumer-friendly and is normally completed within a couple of weeks rather than the allowed-for 30 days. Consumers can now add supporting documents/attachments to their dispute communications and the credit reporting agencies can and do override responses from their data furnishers, disproving the assertion that the credit bureaus simply “parrot” what’s reported to them.

There are many other protections afforded to consumers by the FCRA, but some argue it falls short of helping consumers to establish or rebuild their credit. The reason is that the entire credit reporting system is voluntary.

Voluntary System

The FCRA does not require any lender or service provider to report information to the credit bureaus. That’s why you generally don’t see things like rent or utilities on consumer credit reports. And, even in the lending environment, there’s no requirement that any lender must report your account or accounts to any or all of the credit bureaus. And while I’m not criticizing the Act’s silence on this issue, unknowing consumers may think they’re building credit by paying rent and utilities when they really aren’t.

Even in the world of authorized user tradelines, a common and effective method of building or rebuilding credit reports and credit scores, there are some card issuers that do not report to the credit reporting agencies. There’s no obligation in the FCRA for issuers to do so. As such, it’s important that if you’re being added as an authorized user to someone’s credit card that you do so with an issuer that does, in fact, report to the credit reporting agencies.

The Card Act

Let’s get something on the record…I really don’t like the CARD Act. The Card Act is the statute that makes it illegal for credit card issuers to grant credit to a consumer who is under 21 unless they have a job or a co-signer. The same consumer can get themselves into five or six figures of student loan debt, but they can’t open a credit card.

Additionally, many large credit card issuers don’t allow co-signers any longer. As such, the “co-signer” exclusion to the under-21 restriction of the CARD Act isn’t even an exclusion any longer, unless you want to limit your credit card options. Further, the under-21 rule also seems to suggest when someone turns 21 their financial or employment situation will immediately change, which isn’t a guarantee and certainly not tied to an age.

Those who are under 21 can still begin to build credit using the authorized user strategy.

The under-21 restriction also puts everyone who doesn’t have a job or a co-signer three years behind the curve as to building their credit reports. Before the CARD Act, someone as young as 18 could have opened credit accounts in their name, no problem. This eventually served them well as they would start building credit at an earlier age.

Authorized Users Are Still A Good Option

The one way around all of this statute silliness is the authorized user strategy. There is no restriction to being added as an authorized user to a credit card, regardless of your age. As such, people who are under 21 can still begin to build credit, improve their credit scores, and enjoy the benefits of using plastic.

John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group and the author of four books about consumer credit. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has 27+ years of experience in the consumer credit industry, has served as a credit expert witness in more than 370 lawsuits, and has been qualified to testify in both Federal and State courts on the topic of consumer credit. John serves as a guest lecturer at The University of Georgia and Emory University’s School of Law.

Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.

Read more: tradelinesupply.com

#AskanExpert: Should I Apply for an Apartment or a Credit Card First?

October 31, 2019CreditBy toptierfinancial

Q. I am planning to apply for a new apartment soon and my credit score is 678 from Equifax and 608 from Transunion. What do most rental companies require to get approved? This is a low-income property.

I also want to get a new credit card for someone with low income and no annual fee. Are there any credit cards that will give me a card with my current credit scores? Also, should I wait to get a credit card after the apartment complex does their credit check or should I get a credit card first?

Dear Reader,

Each rental company will look at your credit report differently. Ultimately, they want to know if they can trust you to pay them on time every month. Because your credit score is considered fair, you may end up needing to have a bigger deposit to secure an apartment.

Having only fair credit can make it difficult to get a credit card with a decent interest rate. However, you can look for a secure credit card. These cards work like regular cards, but they are secured by a deposit you make. Secured cards provide a great way for people with no credit or with a low score the opportunity to improve their scores and their credibility.

Be sure to do your homework and compare several secured credit cards. Look for one that meets your needs–in this case, one that does not have an annual fee. Another option for improving your credit would be to check out Experian Boost. It uses your phone and utility bill payments to “boost” your score if you have been paying those regularly and on-time.

Now, whether you should wait to get your card after the apartment company reviews your credit, I think you should. Whenever you ask for new credit, even for a secured credit card, a hard inquiry is generated on your report, and it lowers your credit score. So, it’s best to have the highest possible score to get your apartment.

After that, apply for the card and use it strategically, always paying on time and only using up to 30% of your available credit or less. If you need additional guidance, feel free to contact an NFCC-certified credit counselor from a local nonprofit near you. They are ready to help and can provide more personalized recommendations for improving your credit. Good luck!

Sincerely,

Bruce McClary, Vice President of Communications

Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.

The post #AskanExpert: Should I Apply for an Apartment or a Credit Card First? appeared first on NFCC.

What’s the Difference Between Credit Repair and Adding Tradelines?

October 14, 2019CreditBy toptierfinancial

I was speaking to a consumer group recently and the topic of credit repair came up as a discussion point. I fielded questions about whether or not credit repair is legal, how to identify good credit repair companies, and whether the process of traditional credit repair is better or worse than adding tradelines to your credit reports. It occurred to me that there was a considerable disconnect between what is traditional or garden-variety credit repair versus adding tradelines to your credit reports, thus the purpose of this writing.

Traditional Credit Repair

While I have no dog in the fight between credit repair companies and the tradeline industry, it appears some credit repair companies misrepresent their services. Credit repair is often positioned as a way to get inaccurate or unverifiable information removed from your credit reports. It appears, however, that traditional credit repair is built more around getting negative information removed from your credit reports, whether it is accurate, verifiable, or not.

Some credit repair companies “jam” the credit bureaus with repetitive dispute letters.

While some credit repair companies are more surgical in their approach when communicating with credit bureaus and lenders, some credit repair companies choose to simply bury them with repetitive dispute letters. This process is commonly referred to as “jamming.” Sometimes jamming is successful in getting negative information removed while other times it isn’t. And, of course, if you’re successful in getting negative information removed from your credit reports, your credit scores may improve.

Traditional credit repair comes with a price tag. The price tag, frankly, is what makes credit repair credit repair. If a company charges you a fee for a service represented as one that will help you to improve your credit, that meets the definition of a credit repair organization in the Federal statute known as the Credit Repair Organizations Act. If there is no fee or valuable consideration, then it’s not credit repair.

Adding Tradelines

There are only three ways to add tradelines to your credit reports, and two involve associating your name with a credit card account. You can certainly apply for and open a new credit card account. If you are approved the lender will likely report the account/tradeline to your credit reports.

You can also have your name added to an existing account as an authorized user. An authorized user is someone who is authorized to use the credit line of a credit card account, but doesn’t have any liability for the debt. Credit card issuers often report credit card account information to the credit reports of the authorized user. And, if the account is in good standing and has a low balance relative to the credit limit, the result can be an improvement in your credit score.

You can add tradelines to your credit report by becoming an authorized user on someone’s credit card.

Being added to someone’s credit card as an authorized user is free, meaning the card issuer isn’t going to send you a bill for adding someone to your credit card account. There are, however, companies that will broker the authorized user process and they do normally charge a fee for their services.

The third option is fairly new, Experian Boost. Boost is an Experian service whereby they will add your utility accounts to your Experian credit report if you pay them from your bank account. The service, as of the date of this article, is free.

Boost requires a leap of faith as you will be asked to provide the name of your bank and your login credentials, including your username and password. Using that information Experian will gain access to your utility payment transactions and add them to your credit report. If you do not pay your utilities with your bank account, you cannot add them to your credit report using Boost.

It appears the difference between traditional credit repair and tradelines is really the difference between addition and subtraction. Garden variety credit repair is built around getting negative information removed or “subtracted” from your credit reports. The tradeline or authorized user strategy is built around adding positive credit card accounts to your credit reports.

Because there is no single path to a lower credit score, there is also no single path to a higher credit score. As such, both credit repair and tradelines can result in higher credit scores. However, there is no guarantee that either will lead to higher scores as the impact of removing information or adding information is highly individualized and difficult to predict with a great deal of precision.

Disclaimer: The views and opinions expressed in this article are those of the author John Ulzheimer and do not necessarily reflect the official policy or position of Tradeline Supply Company, LLC.

Read more: tradelinesupply.com

Why Did My Credit Score Go Down?

How To Use The Fair Credit Reporting Act To Your Advantage

How Do Closed Accounts Affect Your Credit?

Is a Balance Transfer Worth It? How to Know if It’s Right for You

At What Age Can You Start Building Credit?

Easy Credit Hacks That Will Actually Get You Results

What Is the Difference Between Individual and Overall Credit Utilization Ratios?

Do Federal Laws Really Help Me Establish Credit?

#AskanExpert: Should I Apply for an Apartment or a Credit Card First?

What’s the Difference Between Credit Repair and Adding Tradelines?

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