How Credit Score Ranges Matter

How Credit Score Ranges Matter - PinterestFinancial and lending institutions use credit scores to determine how likely someone is to repay a loan. According to FICO, the average credit score in the United States stands at 716, but that number varies significantly by state. Credit scores range from 300 to 850, and each number corresponds to a different level of credit risk.

A high credit score means you’re a low-risk borrower, which could lead to lower interest rates on loans and other lines of credit. On the other hand, low credit scores could mean higher interest rates and a greater chance of not being approved for a loan.

While most people know they have credit scores, they may not understand why these score numbers matter or how they are determined. Read on as we explore how different credit score ranges map to financial situations and tips on how you can improve your credit score.

What Credit Score Ranges Should Mean To You

Different credit score ranges correspond to varying levels of risk. Knowing your credit score is incredibly helpful when it comes to determining whether you will qualify for a loan or credit card.

Credit card companies and lenders use credit scores to determine your loan qualification, credit limit, and applicable interest rate. Lenders often give more appealing interest rates to people with high credit scores because there is a lower chance of the debt not being repaid by the borrower.

Since people with low credit scores are considered high-risk borrowers, they may have trouble getting approved for various financial products, including personal and credit cards. As a result, they could be charged higher interest rates or denied credit entirely.

What Are the Credit Score Ranges?

Credit scoring companies like FICO use multiple credit scoring models to determine your credit score. FICO scores dominate the market, and the most popular versions range from 300-850, with each number indicating how likely you are to be a responsible borrower. Below are the different credit score ranges and what they represent financially:

FICO credit score ranges

Commonly used FICO credit scores range from 300 to 850.

Exceptional 800-850

Consumers with exceptional credit scores have consistently excellent credit usage behavior. They have low balances on their credit card accounts, maintain their credit utilization ratios around 10% or lower, and have a long history (decades) of on-time monthly payments. Borrowers within this range are offered higher credit limits and can qualify for lower rates on personal loans, credit cards, lines of credit, and mortgages.

The highest possible credit score you can have on the FICO scoring system is 850. While it is possible to obtain a perfect 850 credit score, it is not necessary to do so in order to get the best credit offers, nor is it a practical goal. Getting an 850 credit score requires that every single credit scoring factor must be perfect, which is simply not possible for most consumers.

Home mortgage credit score range

Consumers with credit score ranges that are very good or exceptional will get the best interest rates on mortgages and other loans.

Very Good 740-799

A score between 740 and 799 is in the very good credit range. These borrowers generally have good financial responsibility regarding credit and money management. They have lower credit utilization ratios, a good history of on-time payments, and few derogatory marks on their credit reports.

Most lenders are still comfortable extending lines of credit to these borrowers, so people within this range are likely to get approved for loans and other products with favorable interest rates.

Good 670-739

A FICO score falling between 670 and 739 is considered a good credit score. The national average credit score stands in this range. This score indicates that you have generally been responsible with credit in the past and paid your bills on time. You may qualify for average rates, but it may become more difficult to be approved for some types of credit. You’ll likely have to shop around in order to find the best interest rates.

Fair 580-669

Individuals with credit scores within this range are below the national average and may have negative marks on their credit reports. If you have a FICO score in this range, you’ve likely missed payments or shown signs of high credit usage and delinquencies. This means you may not qualify for some types of credit, such as loans or credit cards. Few lenders will likely extend a credit line to you but offer high-interest rates.

Poor 300-580

This range is the lowest credit score rating on credit reports and is considered to be very bad credit. People with a FICO score in this range are seen as high-risk borrowers and may be unable to get approved for loans, lines of credit, or mortgages. They have several cases of missed payments, high balances, and high credit utilization ratios. Poor credit scores may also result from filing bankruptcy or having debt in collections.

Credit invisible

“Credit invisibles” are those who do not have a credit score, which can be equally as problematic as having bad credit.

No Credit Score

It is possible to not have a credit score at all, which is known as being credit invisible. If you haven’t had a loan or credit card for several years, your credit score may not be able to be calculated because there is insufficient information on your credit reports.

Lenders may still allow you access to credit based on your other assets, but it usually requires additional verification of your assets and income.

How To Build Credit & Earn A Better Credit Score

Building and improving your credit score can be a challenging but rewarding experience. Your credit score will increase your access to financing products with lower interest rates and fees on everything from loans to mortgages. Below are some tips that can help improve your score:

Make all of your monthly payments on time – One of the most significant factors that go into calculating your credit score is your payment history. A history of on-time payments will help boost your credit score. If you miss payments, this can be reported to credit reporting agencies and damage your credit score.

Pay more than the minimum payment – By only making the minimum payment each month, you make it easier for yourself to accumulate more and more debt. Not paying your balance in full also increases your utilization ratio, which impacts your score negatively the higher your utilization becomes. Focus on paying off as much of the balance as possible each month.

Keep credit card balances low – Again, carrying large balances negatively impacts your credit score, so it is important to consistently keep your balances low if you can. If you have large outstanding credit card balances on your accounts compared to your available credit, lenders are also more reluctant to give you a new line of credit because they may view you as financially over-extended.

Wallet with credit cards

Keeping your credit cards open while maintaining low balances helps your credit utilization and, by extension, your credit score.

Keep your credit cards open – Closing a credit card account can hurt your credit score because you no longer get the benefit of its credit limit. Keeping your credit cards open even if you are not using them much allows the cards to help out your credit utilization metrics, boosting your credit scores.

Only apply for credit when you need it – Each time you apply for a new loan or credit card, lenders check your credit report, which results in a hard inquiry being added to your credit report. Having too many hard inquiries within the past year can impact your score negatively. If lenders see a lot of inquiries in your credit history, they may be concerned that you are taking on too much new debt and might not be able to make all of your payments on time.

Why You Should Never Trust a CPN to Boost a Credit Score Range

If you’re looking to boost or reset your credit score and come across a company that offers Credit Privacy Numbers (CPN), it’s best to stay away. A CPN is a nine-digit fake or stolen Social Security number that credit repair companies sell to people who want to repair their credit scores.

These companies instruct you to use the CPN in place of your Social Security Number when applying for credit. CPNs are generated randomly or stolen Social Security numbers, mostly from children, inmates, and senior citizens. Using a CPN is illegal, and when caught, you can face a hefty fine or even jail time.

Using a CPN instead of a stolen Social Security number, you may be committing an identity theft crime. Depending on your state and the statute of limitations, you could be jailed for a maximum of 15 years and face thousands in fines. Using a CPN to reset or boost your credit score is not worth the risk.

7 Fast Credit Building Strategies to Influence Your Credit Score Range

Credit scores have become an essential part of today’s society. It’s no longer just used for loan applications. Employers and landlords may also ask to review your credit score or credit history. In some cases, you may not get access to housing, utilities, or insurance if you have a low credit score.

If your credit score isn’t your ideal number, or is below the average credit score, there are several things you can do to help increase it. Here are seven fast strategies to help improve your credit score range:

1. Develop Your Credit File

Creating a positive credit file is the first step in building credit. This can be done by opening a credit line that is reported to the major credit bureaus. If you make on-time monthly payments and keep your revolving utilization ratio below 30%, this demonstration of good credit behavior will increase your credit score and, in turn, boost your credit score range. Higher credit scores will open doors to better financing options and lower rates.

2. Check Your Credit Reports

When building your credit score range, it’s critical to check your credit reports to know where you stand.

As mandated by the Fair Credit Reporting Act (FCRA), you can get your credit report for free once a year from each of the three credit bureaus. Additionally, during the COVID pandemic, the credit bureaus have volunteered to provide free credit reports to everyone on a weekly basis. This 

Review each credit report for inaccurate information and dispute errors as necessary.

3. Dispute Credit Report Errors

Your credit score can be significantly lowered if your credit report contains erroneous negative items. However, the credit bureaus can be contacted if any errors are found. Your dispute letter must be investigated and responded to by the credit bureau within 30 days. If you find the information to be inaccurate, you can request that it be removed or corrected on your credit report.

4. Pay Your Bills on Time

Payment history is the most critical factor in your credit score, accounting for 35% of your score. No credit-building strategy will be effective if you do not consistently pay your bills on time. Late payments can remain on your credit report for up to seven years.

If you do this successfully, having a long history of on-time bill payments will help you achieve excellent credit scores. To avoid accidental missing or late payments, you can set up reminder notifications and automatic bill payments with your lenders.

5. Increase Your Credit Limit

Paying off credit cards and other revolving accounts may help boost your credit score range, but having a high amount of available credit will add points to your score. Consider increasing the limit on your lines of credit to decrease your utilization ratio. An ideal time to do this is after building up a history of responsible credit usage or when you have started a better-paying job.

According to the Consumer Financial Protection Bureau, your payment history, credit mix, debt owed, and length of your credit history are some important credit factors a credit card issuer will look at when determining your credit limits.

6. Catch Up on Delinquencies and Past Due Accounts

If you have missed payments in the past, try to resolve them as soon as possible. Bringing your delinquent accounts current will help improve your credit score, and paying off collections may help your score depending on which credit scoring model is used.

Since most negative information like late payments remains on your credit report for seven years, it’s important to start repairing your credit history as soon as possible.

If you have trouble with credit card debt, consider talking to a credit counselor to create a debt management plan. They may be able to negotiate lower monthly payments and interest with your creditors and help you pay off old collection accounts faster. Some may even work to get these negative marks removed from your report.

7. Get a Secured Credit Card

If you are just starting out or have had credit problems in the past, applying for a secured card can help you improve your credit score. When you apply for a secured card, you make a security deposit that the issuer will use as collateral if you are unable to pay.

Monthly payments on a secured credit card will help build your credit score. You should look for secured cards that report to all three major credit bureaus in order to take advantage of the credit-building benefits of credit cards.

The Dollar Differences in Credit Score Ranges
Dollar cost of low credit score ranges

The difference between good credit and bad credit can add up to thousands of dollars of interest over your lifetime.

The higher your credit score range, the less risk you pose to lenders and the more likely you are to be approved for a loan with a lower interest rate.

For this reason, having a good credit score can save you thousands of dollars in interest costs.

However, those with low credit scores will have trouble getting approved for a loan, and those who do may be required to pay a higher interest rate to offset the increased risk of lending. Therefore, having a low credit score means you pay more for financing big-ticket items like a car or a home.

Why You Should Share What You Learned About a Credit Score’s Range

Sharing your knowledge about credit score ranges will help people understand the importance of maintaining a good credit score. To get financing for big-ticket items or a dream home, your credit score must reflect your financial responsibility. In the long run, consumers will save money and have easier access to credit when they have a history of good credit habits. 

For lenders to feel confident that you are financially responsible, you should maintain a good credit mix of accounts including a checking account, savings account, and an investment portfolio.

Follow the credit tips above, such as maintaining a low credit utilization rate, making on-time payments, and not opening too many accounts at one time so that you can maintain a good credit score.

Conclusions on Credit Score Ranges

It’s important to understand credit score ranges and realize that they are a reflection of your creditworthiness. 

Positive credit habits can open doors to financial opportunities that you would not be able to access otherwise, so start building up your credit history and credit scores now. Finally, make sure to keep up your good credit habits consistently to set yourself up for financial success in the future.

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Ask an Expert: How Do I Build Good Credit From Scratch?

The NFCC often receives readers questions asking us what they should do in their money situation. We pick some to share that others could be asking themselves and hope to help many in sharing these answers. If you have a question, please submit it on our Ask an Expert page here.

This week’s question: I need some advice in regards to my credit report and good ways that I can begin to build up my credit. I have no credit at all. Eventually within five years once I’m out of school I want to buy a house.

Building credit from scratch will take some time and effort, just like getting a job after graduating from school. You can think about good credit as a means to an end: you need good credit to finance big purchases and get the best interest rates and repayment terms on loans and mortgages. So, getting your credit ready is an excellent start to buying a home in the near future.

What is on Your Credit Report? 

Your credit is a record of your monthly financial credit transactions. Your creditors report your activity to the three credit bureaus, Equifax, Experian, and TransUnion, and they use that data to generate a credit score. Your credit report also includes your personally identifying information such as your name, addresses, social security, and some public records such as bankruptcies and judgments and tax liens, if you have any. To start generating data for your credit report, you need to get a credit line. The easiest way to do that is to get a secured credit card. Many banking institutions issue secured credit cards, and they work pretty much like a regular credit card. The main difference is that these cards are backed by a cash deposit, which usually corresponds to the card’s credit limit.

Be Strategic

Learning how to use your credit card strategically is equally as important as getting that credit line. Your credit score takes into consideration several factors. The factor that influences your score the most is whether you pay your accounts on time and as agreed. Late or insufficient payments are very detrimental to your credit history. So, you should plan to pay in full and before your due date. Another important factor is your utilization ratio, which is how much you owe compared to your available credit. To have a balanced ratio, experts recommend that you use only 30% or less of your available credit in every billing cycle. For instance, if you have a $500 credit limit, you should be using less than $150.

Yet another factor is the age of your credit history. The older your credit history, the more history and data you’ll have to establish a solid credit history. Achieving this will just require time and your continued effort. The other two factors to keep in mind are the mix of credit you have (credit cards and loans) and how often you ask for new credit. Too many new credit inquiries reflect negatively on your score, so it’s important that you only apply for new credit sporadically. In your case, you should keep your secured credit card for at least a year before applying for a regular credit card. In some cases, your creditor may even upgrade your secured credit card to a regular one and return your cash deposit.

It’s never too soon to start building your credit. And once you learn healthy credit management habits, it will be very easy for you to manage your credit and use your credit cards responsibly on a daily basis. If you feel you need additional guidance or personalized help to get you started, you can always reach out to an NFCC Certified Financial Counselor. They are ready to help over the phone, online, and in-person if it’s available in your state. Good luck!

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What Does It Mean to Be Credit Invisible?

What Does It Mean to Be Credit Invisible? - PinterestHere’s a number that may shock you: about one in five American adults do not have a credit score.

About 26 million consumers are what the Consumer Financial Protection Bureau calls “credit invisible,” which means they don’t have any credit history. Another 19 million consumers have credit records that cannot be scored by a commonly used credit scoring model.

Added together, that means 45 million consumers in our country⁠—nearly one in five adults—lack a credit score.

Without a credit score or a sufficient credit record, it can be extremely difficult to navigate modern society. Credit scores indicate a consumer’s credit risk and therefore serve as the basis for most lending decisions, along with income. It can be difficult or even impossible to obtain credit without one.

Credit scores may also be used by landlords to evaluate prospective tenants, by insurance providers to determine rates, and by utility companies when assessing deposits. Employers may pull prospective employees’ credit reports in order to make hiring decisions.

Therefore, consumers who are credit invisible or credit unscorable may face serious challenges in obtaining credit, housing, insurance, utilities, and employment.

Unfortunately, but perhaps not surprisingly, the problem of credit invisibility is concentrated among certain demographics of consumers.

In this article, we’ll address who is most impacted by credit invisibility and the consequences of lacking credit history. In addition, we will discuss potential solutions to this issue and explain how tradelines can help consumers become credit visible.

Defining Credit Invisibility and Unscorability

The Consumer Financial Protection Bureau published a report on credit invisibility in 2015 in which the Bureau determined how many Americans are lacking credit histories.

For the report, they analyzed a nationally representative data set containing the anonymized credit reports of nearly 5 million consumers. The CFPB purchased these anonymized credit reports from one of the major credit bureaus.

By subtracting the number of credit records in a census tract from the total number of adults living in the census tract, they were able to estimate the number of credit invisible consumers in each census tract.

Nearly 20% of consumers in the U.S. do not have a credit score due to a lack of credit history.

Nearly 20% of consumers in the U.S. do not have a credit score due to a lack of credit history.

Overall, the CFPB found that more than 80% of the adult population in the United States (188.6 million consumers) have credit records with at least one of the major credit bureaus that contain enough information to be scored by the commercially available credit scoring model used for the CFPB’s research.

In contrast, 8.3% of adults have credit records that cannot generate a credit score using this credit scoring model. This group of 19.4 million consumers is divided about equally between consumers whose credit reports do not contain enough information to be scored (“insufficient unscored”) and consumers whose credit history is not recent enough to be scored (“stale unscored”).

This leaves 11% of the adult population who are completely credit invisible, meaning they do not have a credit record at all with any of the major credit reporting agencies.

What Are the Consequences of Being Credit Invisible or Unscorable?

The credit reporting agencies and credit scoring companies have been extremely successful in marketing their products to other industries. As a result, credit checks are now a standard procedure in many essential aspects of modern life. This means that being credit invisible can have devastating consequences for consumers.

Credit May Be Unattainable or Very Expensive

The “credit catch-22” is that in order to qualify for credit, you must already have a history of using credit. Lenders want to see a pattern of responsible borrowing before they take the risk of extending you credit.

Therefore, the obvious problem with having no credit history or minimal credit history is that it bars access to mainstream credit products such as loans and credit cards.

This lack of access to conventional credit options leads credit-invisible and unscored consumers to turn to “alternative financial service providers” (AFSPs), which include businesses such as payday lenders, pawn shops, and check-cashing stores. Unfortunately, services provided by AFSPs typically come with much higher costs than traditional credit products offered by banks.

Consumers who are credit invisible may turn to high-cost AFSPs such as payday lenders if they cannot access traditional credit products.

Consumers who are credit invisible may turn to high-cost AFSPs such as payday lenders if they cannot access traditional credit products.

As most consumers do, those who are credit invisible or unscorable have legitimate credit needs, but unfortunately, their options are usually limited to high-cost AFSPs. 

Housing May Be Difficult to Find and More Costly

Renting a home almost always involves a credit check for the prospective tenants. Often, landlords will simply reject applicants who do not have a credit record.

Some landlords may accept tenants who don’t have any credit history, but since it’s financially risky for them, they will likely charge more for the deposit or ask the tenant to prepay multiple months of rent.

Utility Providers and Wireless Carriers May Require a Deposit

Providers of utilities such as gas, electricity, water, trash, internet, and phone service also typically conduct credit inquiries on consumers. Knowing your credit score helps these companies judge how likely they think you are to pay your bills on time.

If you don’t have a credit score, they can’t make that judgment with confidence. To hedge their bets, the utility companies may ask you to pay a larger deposit upfront.

Insurance Could Be More Expensive

Credit scores are often considered as a factor when insurance companies decide on your rates for auto insurance as well as homeowner’s insurance, according to If they can’t use a credit score to help determine your rate, they may end up charging you more.

Who Is Most Likely to Be Credit Invisible or Unscorable?

As you may remember if you’ve read our article on the topic of equal credit opportunity, the likelihood of being credit invisible isn’t the same for all consumers. In fact, there are strong correlations between credit invisibility and race, age, geography, and income.

Black and Hispanic Consumers Are More Likely to Lack Credit History
The CFPB discovered that consumers who are Black and Hispanic are more likely to be credit invisible or unscorable.

The CFPB discovered that consumers who are Black and Hispanic are more likely to be credit invisible or unscorable.

Compared to consumers who are White or Asian, Black and Hispanic consumers are more likely to be credit invisible or to have credit records that cannot be scored, according to the CFPB’s report.

Only 9% of White and Asian consumers are credit invisible, compared to about 15% of Black and Hispanic consumers. Similarly, only 7% of White adults have unscorable credit records, in comparison to 13% of Black adults and 12% of Hispanic adults.

The CFPB observed that this pattern was consistent across all age groups, which demonstrates that the differences between racial groups are established early on and never go away.

Credit Invisibility Is Correlated With Age

Younger consumers are far more likely to lack credit history than older adults. The CFPB report states that the vast majority (80%) of 18 to 19-year-olds are either credit invisible or have unscored credit records.

For the 20 to 24-year-olds age group, less than 40% are credit invisible or unscored. After the age of 60, however, this percentage begins to increase with age, although it’s not clear exactly what causes this effect.

Because credit history is gradually established over the course of one’s life, it makes sense that credit invisibility and unscored credit records would be more prevalent among young adults.

Income May Affect the Ability to Acquire Credit History

The CFPB found a strong correlation between income and having a credit record that can be scored. In low-income neighborhoods, nearly 30% of consumers are completely credit invisible, while another 15% are unscorable. In total, nearly half of consumers in low-income areas either have no credit history at all or not enough credit history to generate a credit score.

In contrast, in higher-income neighborhoods, only 4% of consumers are credit invisible and an additional 5% have credit files that cannot be scored.

These results aren’t particularly surprising. Income is often even more important than credit score when it comes to qualifying for credit. Even without having any credit history, a consumer with a high income will likely find it easier to qualify for credit than a low-income consumer and thus is more likely to open credit cards or take out loans than a low-income consumer.

Rates of credit invisibility are especially high in low-income neighborhoods.

Rates of credit invisibility are especially high in low-income neighborhoods.

On the other hand, since low-income consumers may have difficulty accessing traditional sources of credit, they may turn to AFSPs such as payday lenders, which typically do not report to the credit bureaus. This hypothesis may help partly explain why there is such a stark difference in the likelihood of credit invisibility between higher-income and lower-income consumers.

When consumers in low- and moderate-income neighborhoods do become credit visible, according to the CFPB, they tend to make the transition later in life than consumers in middle- and upper-income neighborhoods.

In addition, the CFPB report on “Becoming Credit Visible” concluded that consumers who reside in low-income neighborhoods are three times as likely than consumers in high-income neighborhoods to first acquire credit history from non-loan items such as collection accounts or public records (27% of low-income consumers versus just 8% of high-income consumers).

In contrast, consumers in upper-income neighborhoods are much more likely to start their credit records by opening credit cards.

Since the non-loan credit products are generally derogatory items like collections, this statistic suggests that low-income consumers are far more likely to start off their credit history with bad credit. The negative marks could hinder these consumers from being able to qualify for credit for a long time, which means they would likely have few, if any, opportunities to improve their credit profile with on-time payments toward loans or credit cards.

Geographic Regions of Credit Invisibility

Another CFPB report, this one from 2018, looked at geographic patterns in credit invisibility, such as differences between urban and rural areas as well as the problem of “credit deserts.”

Credit Deserts
Credit invisibility is more common in rural areas.

Credit invisibility tends to be more common in rural areas.

A “credit desert” is generally defined as an area that lacks access to traditional financial service providers. However, they may have access to AFSPs such as payday lenders.

In these areas, rates of credit invisibility may be higher due to a lack of access to traditional sources of credit.

Urban vs. Rural Areas

The highest proportion of credit invisible consumers is found in rural areas, even in upper-income neighborhoods. This may be related to a lack of access to the internet in rural areas.

What Is Being Done to Solve Credit Invisibility?

Credit invisibility in America is a serious problem that is not going to be solved overnight. It’s going to take overarching structural changes to address the root causes of credit invisibility and credit inequality.

Let’s explore the potential solutions currently being researched by the U.S. government and by the credit scoring and reporting companies to address credit invisibility and credit inequality.

Government Programs to Support Credit Access

In the CFPB’s Annual Financial Literacy Report for 2019, the Bureau described their efforts to support inclusion and serve historically underserved communities by assisting local governments that are working to address credit invisibility in their cities.

These municipal programs typically focus on helping consumers build good credit by providing consumers with credit education, credit services, and credit products.

The CFPB worked with four cities in the fiscal year 2019 (Atlanta, Georgia; St. Louis, Missouri; Shawnee, Oklahoma; and Klamath Falls, Oregon), so it appears that government efforts to combat credit invisibility thus far have been localized and small-scale.

Alternative Credit Data
Using alternative data, consumers may be able to get credit for their rent and utility payments.

Using alternative data, consumers may be able to get credit for their rent and utility payments.

Alternative credit data is data derived from sources other than traditional credit reporting information. This may include data from ASFPs, utility payments, rent payments, full-file public records, and financial information that consumers can choose to share, such as bank account information (known as “consumer-permissioned data”).

While alternative data does have the potential to help millions of consumers become credit visible, for a majority of them, that may not be a good thing. FICO’s preliminary research using their alternative data scoring model showed that two-thirds of newly scored consumers ended up with a score that was below 620, which is considered bad credit.

Having bad credit can be even worse than having no credit, so for these consumers, the use of alternative data would hurt more than it helps. 

Furthermore, the National Consumer Law Center has argued that the negative effects of such a credit scoring system would disproportionately impact people of color and low-income consumers.

Alternative data may represent a possible solution to credit invisibility, but it should be implemented in a way that does not simply perpetuate and amplify the credit inequality that consumers already struggle with.

How to Become Credit Visible

It’s clear that credit invisibility, lack of access to credit, and inequality in the credit system are not going away anytime soon.

For now, however, we can at least discuss some strategies that individual consumers can use to start building credit and transition from being credit invisible to credit visible in a way that sets them up for success.

Becoming Credit Visible Through Credit Piggybacking

It’s incredibly difficult to get approved for a primary account when you don’t have any credit history to show lenders that you can be trusted. However, you can start to build credit history even without opening a primary account by piggybacking on someone else’s credit.

Piggybacking credit can help consumers transition out of credit invisibility.

Piggybacking on another person’s credit can help consumers transition out of credit invisibility.

Credit piggybacking is when you become associated with someone else’s credit record for the purpose of building credit. This is actually a fairly common way for consumers to start establishing credit.

In “Becoming Credit Visible,” the CFPB noted that about 15% of consumers opened their first credit account with a co-borrower, while another 10% first created their credit record by becoming an authorized user on someone else’s tradeline. This means that in total, about one in four consumers initially gain credit history with the help of someone else via credit piggybacking.

There are three main ways to credit piggyback.

1. Get a Cosigner or Guarantor

When you can’t get credit on your own, having someone who has good credit who can vouch for you as a cosigner or guarantor can make a huge difference in your chances of being approved for credit.

However, it can be difficult to find someone to take on this role, since it not only requires someone with good credit but someone who would be willing to be on the hook for your debt if you cannot repay it.

2. Open a Joint Account With Someone

A joint account is an account that you share with another person. Both parties have access to the account and both people can be held responsible for the debt.

If you know someone with good credit who is willing to open a joint account with you, their positive credit history can help the two of you get approved, similar to getting a cosigner or guarantor. Since both parties jointly share responsibility for the account, you should only open an account with someone you trust completely.

Joint credit cards are not very common, so your options for opening a joint account may be limited.

3. Become an Authorized User on a Credit Card With Age and Positive Payment History
Credit invisible consumers can add credit history to their credit reports by becoming authorized users on seasoned tradelines.

Credit invisible consumers can add credit history to their credit reports by becoming authorized users on seasoned tradelines.

While the previous two credit establishment strategies involve opening a new primary account, which means you’d be starting out with no credit age, the authorized user method provides a shortcut to gaining years of credit history.

When you become an authorized user on a seasoned tradeline (an account with at least two years of age), often the full history of that account is reflected in your credit report as soon as the next reporting date for that account. In other words, you can add years of credit age and positive payment history to your credit file in just a few weeks and sometimes even faster.

The CFPB’s research showed that 19% of consumers (about one in five) had at least one authorized user account on their credit record, and over half of these consumers had transitioned out of credit invisibility as a result of one of their authorized user accounts. On average, consumers gained at least two years of credit history from authorized user accounts.

Not all banks report authorized user data, but when you buy tradelines from Tradeline Supply Company, LLC, you can be confident that we only work with banks that have been proven to reliably report authorized user information.

In addition, authorized user tradelines can increase the total credit limit of your profile.

For these reasons, the authorized user strategy is the fastest and easiest way for those who lack credit history to start building credit.

We cover each of these credit-building strategies in greater detail in our article on the fastest ways to build credit.

Building Credit Through Primary Accounts

Once you’ve established some credit history through credit piggybacking, you can look into opening your own primary accounts.

Credit-Builder Loans
A credit-builder loan is a good option for those without credit history since they are easier to get approved for than traditional loans.

A credit-builder loan is a good option for those without credit history since they are easier to get approved for than traditional loans.

A credit-builder loan is a type of installment loan designed for those who are just starting out on the path to building credit. Lenders are able to offer these loans to consumers with thin credit files or no credit history because they are set up so that the borrower makes all the payments toward the loan before receiving the funds.

See our article on credit-builder loans for more information on how they work and whether a credit-builder loan could help you.

Secured Credit Cards

Those with limited credit history may also benefit from opening a secured credit card. Secured credit cards require you to make a security deposit, the amount of which then becomes your credit limit. Secured cards typically have low credit limits, but they can help you build credit by reporting your payment history to the credit bureaus.

Retail Store Credit Cards

A retail store credit card may also be a good option for those who do not have a credit history, as they tend to be easier to get approved for than bank credit cards. Just be careful not to carry a balance from month to month since retail cards also tend to have higher interest rates.

Creating Equal Credit Opportunity With Tradelines

Unfortunately, inequality has been baked into the credit system from the start, and this fact prevents low-income and minority consumers from getting ahead financially.

For example, the CFPB’s report on becoming credit visible found that low-income consumers were significantly less likely than higher-income consumers to use credit piggybacking methods to establish credit.

Consumers in low- and moderate-income neighborhoods were found to be 48% and 25% less likely, respectively, than consumers in middle-income neighborhoods to become credit visible through a joint account.

Similarly, consumers in lower-income neighborhoods who had recently transitioned out of credit invisibility were less likely to have authorized user accounts on their credit files compared to those in higher-income areas.

In addition, lower-income consumers were less likely to become credit visible via an authorized user tradeline. Lower-income consumers who did have their credit records created as a result of an authorized user tradeline gained less credit history than higher-income consumers.

Since credit piggybacking requires you to partner with someone who has decent credit and/or income, it would seem that perhaps low-income consumers simply do not have access to these resources and partnerships within their social networks.

In the words of the CFPB, “…a lack of co-borrowers may be an important contributor to credit invisibility in low- and moderate-income neighborhoods.”

Today, authorized user tradelines are affordable and accessible to more consumers than ever before.

Today, authorized user tradelines are affordable and accessible to more consumers than ever before.

As we learned earlier, credit invisibility is significantly more prevalent among Black and Hispanic consumers. Altogether, the data suggest that consumers who are Black, Hispanic, or low-income are at a severe disadvantage when it comes to establishing credit and building a credit history.

These are just a few of the many ways in which inequality is manifested throughout the credit system. Simply put, privileged consumers have the opportunity to build credit through credit piggybacking while many others are denied this opportunity.

Historically, the strategy of building credit by becoming an authorized user was primarily limited to the wealthy. Today, however, a marketplace exists where consumers of all backgrounds can take advantage of the benefits of authorized user tradelines.

In addition, there is a wealth of information online that consumers can use to educate themselves on the credit system and start off on the right foot when it comes to building credit.

As a leader in the tradeline industry, Tradeline Supply Company, LLC has opened the door to equal credit opportunity for thousands of consumers. By offering some of the lowest tradeline prices in the industry, we have made tradelines more affordable and accessible to the consumers who need them most.

Related Reading

What Happened to Equal Credit Opportunity for All?

The Surprising History of the Credit Bureaus

Tradelines: What You Should Know About Building Credit

The Fastest Ways to Build Credit [Infographic]

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Credit-Builder Loans: Can They Help You?

What Is a Credit-Builder Loan?

If you have bad credit or no credit at all, you’ll likely have a hard time getting a loan. After all, the paradox of credit is that it’s hard to get credit without already having a credit history, much like trying to get a job without any work history.

A credit-builder loan can be a good option for those with no credit or bad credit because credit-builder loans do not require the borrower to have good credit to get approved. However, you will need to show that you have enough income to cover the monthly payments.

Just like a traditional loan, your payment history will be reported to the major credit bureaus. That means you need to make all of your payments on time if you want to build up your credit score.

How Do Credit-Builder Loans Work?

Credit-builder loans, also sometimes called “fresh start loans” or “starting over loans,” are set up differently than traditional loans in order to minimize risk for lenders. 

These loans are typically small amounts, such as $500 or $1000. In addition, unlike other types of loans, you do not receive the money upfront and pay it back later. Instead, this process is reversed.

The definition of a credit-builder loan is a loan where you make the payments first and receive the funds after you have finished paying off the loan. The lender deposits the amount you are borrowing into a savings account or certificate of deposit that will be held for you until you finish making all the payments. Until that point, you can’t access the funds.

Do You Need a Credit Check to Get a Credit-Builder Loan?

Because credit-builder loans are low-risk, in many cases, you can apply for credit builder loans with no credit check. You’ll likely just need to provide your income to prove that you can afford to make the payments.

Banks That Offer Credit-Builder Loans

Most of the big national banks, such as Chase, Bank of America, and Capital One, do not typically offer credit-builder loans, although Wells Fargo offers secured personal loans.

The best credit-builder loans can often be found at local banks and credit unions or through online lenders.

Payment history makes up 35% of your FICO score.

Payment history makes up 35% of your FICO score.

Are There Downsides to Getting a Credit-Builder Loan?

With a “fresh start” loan, as with any loan, it can hurt your credit score if you miss any payments. Remember, payment history is the biggest contributing factor to your credit score, weighing in at 35%. So when it comes to building credit, you need to be prepared to make every single payment on time.

In addition, you will be paying interest on the loan and potentially an application fee or other fees, although some lenders may partially refund the interest if you pay the loan back on time.

Finally, it may be several months to over a year before you finish paying off the loan and receive your borrowed funds. Building up a credit score by making payments on a loan takes a minimum of six months of payment history, according to FICO.

Other Ways to Build Credit

For those looking to build or rebuild credit, credit-builder loans are just one option. If you need to build credit fast, also consider one of the credit piggybacking methods we cover in “The Fastest Ways to Build Credit.”

By purchasing authorized user tradelines, for example, you can add seasoned tradelines with years of credit history to your credit report within just days.

Credit-Builder Loans: Can They Help You?

Conclusions on Credit-Builder Loans

For those who may be struggling to build credit due to bad credit or lack of credit history, a credit-builder loan represents one way to get a loan with no credit check and start building a positive credit history.

Just like other types of loans, credit-builder loans come with interest and fees, and the main downside of this type of loan is that you don’t have access to the funds until after you have made all the payments.

On the other hand, when you finish paying off the loan, you will have built up a record of on-time payments and you will have a chunk of savings to take home.

Credit-builder loans can also make a great complement to other methods of building credit, such as credit piggybacking.

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Let’s Get to the Bottom of These Credit Myths

Myths and misinformation about credit scores, credit reports, and credit repair are extremely common. Unfortunately, many people believe these myths, and their credit suffers as a result of taking incorrect actions. 

Let’s get to the bottom of these credit myths and learn the truth about them so you can start improving your credit the right way.

Credit Myths - Pinterest

Myth: Everyone automatically has a credit score.
Fact: 1 in 5 adults in the United States do not have credit scores.

A report by the Consumer Financial Protection Bureau (CFPB) found that one-fifth of adults in the United States do not have enough credit data to calculate a credit score by traditional methods. These consumers are called “credit invisibles.”

Low-income consumers are particularly susceptible to credit invisibility due to lack of access to traditional credit products. Some consumers may be credit invisible for other reasons, such as a voluntary decision not to use credit.

For those that do not use credit for whatever reason, it is likely that they do not have enough of a credit history to generate a credit score.

Consumers that are credit invisible may be able to generate a credit record by piggybacking on the good credit of others, but don’t assume that everyone has a credit score just by virtue of existing.

Myth: Checking your credit report will hurt your credit score.
Fact: Checking your own credit will not hurt your score.

Checking your own credit report results in what is known as a “soft pull,” which means the inquiry does not affect your credit score. 

To understand the difference between hard and soft inquiries and how they affect your credit score, see our article, “Are Inquiries Really Killing Your Credit?

Myth: Your income affects your credit score.
Fact: Your credit score does not look at your income.

However, your income can affect your credit indirectly in that it influences the “five C’s” that have been shown to predict credit performance: capacity to pay off debts, the collateral backing a loan, capital available to repay a loan, conditions that affect income and expenses, and the character of the borrower.

Your capacity to pay off debts as well as the collateral and capital they have available to repay loans may all have a relationship with your income. 

That’s a big part of the reason why low-income consumers are 8 times more likely than high-income consumers to have no credit score at all. In consumers that do have credit scores, those who reside in low-income areas have lower credit scores. In addition, low-income consumers are 240 percent more likely to have their credit file originated due to derogatory items such as collections.

So while your income is not technically incorporated into your credit score, it can definitely influence your ability to repay debts, which is the basis of a credit score.

Myth: You only have one credit score.
Each consumer can have dozens of different credit scores.

Each consumer can have dozens of different credit scores.

Fact: There are many different credit scores.

There are two general types of credit scores: FICO scores, developed by Fair Isaac Corporation, and VantageScore, developed by the three major credit bureaus (Equifax, Experian, and TransUnion).

FICO 8 is the credit score most commonly by lenders today, but in some industries, older models or industry-specific models are used instead. For example, there are FICO scores tailored specifically toward auto loans and credit cards, and mortgage lenders are known to use the older FICO score versions 2, 4, and 5. Plus, FICO scores are different for each credit bureau.

VantageScore, which is increasingly used by some lenders as well as for consumer credit education, also has a few versions. The latest version is VantageScore 4.0, but VantageScore 3.0 is still the most commonly used version today.

Altogether, between the many versions of FICO scores and VantageScores, consumers can have dozens of different credit scores.

Myth: Paying half of your minimum payment twice a month counts as two full payments and tricks the system into giving you twice the credit score boost.
Fact: Dividing your bill in half and making two payments is the same as paying the full amount once.
Screenshot of a tweet that says: "Pay half of your payment 15 days before the due date then pay the remaining half 3 days before the due date. It'll boost your credit score. You trick the system into thinking you made two full payments which helps boost your credit score."

This credit myth is unfounded yet often repeated.

If this “credit hack” sounds a little too good to be true, that’s because it is. It is simply not true that you can “trick the system” into thinking you have made two full payments by making two half payments.

Making a payment on a credit account affects two main factors of your credit score: payment history and credit utilization. Let’s discuss each factor individually.

When it comes to your payment history, making a partial payment that is less than the minimum amount due does not satisfy the requirement and will not count as an on-time payment. Only once you have made the second payment for the other half of the amount due will you have satisfied the requirement to be considered paid on time. Therefore, you do not gain any extra benefit to your payment history from dividing your payment into two parts instead of paying the full amount at one time.

As an example, let’s say you have a bill due on the 30th and the minimum amount you must pay is $50. We have laid out the two payment scenarios in the table below.

Scenario 1: Pay the full amount in one payment
Scenario 2: Make half of the payment twice

Amount Paid
Payment Status
Amount Paid
Payment Status


Insufficient payment—$25 still due

Paid on time
Paid on time


As you can see from the table, in both scenarios, you only get the benefit of paying your bill on time once per billing cycle, not twice.

Now let’s discuss the utilization factor. Continuing with the same example, the total amount you are paying toward the account is $50 in both scenarios. Therefore, the overall improvement in your utilization ratio is going to be the same either way.

Now, if the reporting date for that account is in between the first and second payments, since you have already sent a partial payment, you may temporarily get a small boost from having a slightly lower utilization ratio when the account reports to the credit bureaus. But at the end of the billing cycle, the result will be the same.

If you don't have any credit history, you can being building credit by piggybacking on someone else's good credit.

If you don’t have any credit history, you can being building credit by piggybacking on someone else’s good credit.

If you decide to make extra payments in addition to your minimum payment, which is ideally what all responsible borrowers should be doing, that can certainly help your credit score by speeding up your debt repayment. But simply splitting the minimum payment into two payments won’t do anything to boost your score.

Myth: If you don’t have credit history, you’ll never be able to get credit.
Fact: You can start building credit by piggybacking.

While it can definitely be more difficult to get credit when you don’t have any credit history to begin with, it’s not impossible. There are credit products out there designed for people with no credit or bad credit, such as secured credit cards and credit-builder loans.

Another way to start building credit fast is by piggybacking off of the good credit of someone else. You could have someone you trust cosign on a loan or open a joint account with you, or you could become an authorized user on someone else’s seasoned tradeline.

If you are not lucky enough to know someone who has a seasoned account with perfect payment history that they could add you to, consider purchasing tradelines from a reputable tradeline company.

Myth: Paying off a collection will “re-age” the debt because the account falls off your credit report based on the date of last activity.
Fact: Collections fall off your credit seven years after the initial delinquency and cannot legally be re-aged.
It is illegal to "restart the clock" on collections.

It is illegal to “restart the clock” on collections.

If you’ve read our article about collections on your credit report, then you know that it is the date of first delinquency (DOFD) that determines when the collection will be removed from your credit report, not the “date of last activity” (DLA). 

The reason why some people may believe this myth is because shady debt collectors sometimes illegally change the date of first delinquency to the date of last activity in an attempt to re-age the debt.

As we said, this practice is illegal. If you notice that a debt collector has improperly changed any information about a collection account on your credit report, you have the right to dispute the inaccurate information.

Myth: Paying off a collection will boost your credit score.
Fact: Paying off a collection may or may not raise your score depending on which credit score is used.

While it makes sense to assume that paying off a collection should increase your credit score, that is not always the case. In fact, more often than not, this is not the case, although it depends on which credit score is being used.

With FICO 8 and all previous FICO scores, both paid and unpaid collections are categorized as major derogatory items on your credit report. Therefore, paying off the account will not change how it is considered by the credit scoring algorithm, which means your score may not go up at all.

On the other hand, FICO 9, VantageScore 3.0, and VantageScore 4.0 ignore paid collection accounts, so your score should recover after paying off a collection if one of these credit scoring models is being used.

Myth: You should close accounts you’re not using.
Fact: You should keep accounts open and use them periodically.

While you might think that closing accounts you don’t need will help your credit score, the opposite is actually true, especially when it comes to revolving accounts such as credit cards. 

The main reason for this is that credit utilization is an important part of your credit score, and closing credit card accounts will hurt your utilization ratio by decreasing your credit limit.

It could also hurt your mix of credit, although that’s a less important factor.

In addition, payment history is the number one factor that helps your score. It’s better for your credit to keep the account open, use it for small purchases here and there or a monthly subscription, and pay it off every month to keep building more positive payment history.

The exception to this is if an account comes with an annual fee that’s no longer worth the price or if you can’t resist the temptation to overspend.

Myth: Closed accounts don’t affect your credit.
Fact: Closed accounts can have a significant impact on your credit.

Although we just discussed why you shouldn’t necessarily close old accounts, that’s not to say that closed accounts don’t impact your credit. They certainly can, particularly when it comes to your credit age.

Closing an account does not remove its payment history or age from your credit report, so closed accounts still contribute to your credit age. In addition, accounts can continue to age even after they have been closed.

So although it’s best to keep accounts open if you can, having closed accounts on your credit report is not a bad thing. If the account was closed in good standing, it will likely continue to help your credit.

Carrying a balance on your credit cards is expensive and does not help you build credit.

Carrying a balance on your credit cards is expensive and does not help you build credit. Photo by Hloom on Flickr.

Myth: Carrying a balance on your credit cards will help your credit.
Fact: Carrying a balance will not help you build credit and it will cost you interest fees.

While it is important to use credit regularly when building credit, it’s not necessary to carry a balance on your credit cards from month to month. If you do this in an attempt to build credit, you will be wasting money by paying unnecessary interest. 

The best way to build credit using your credit cards is to use them responsibly and then pay the full balance due each month, or even make multiple payments each month to keep your utilization ratio as low as possible.

Myth: Shopping around for the best rates on a loan will hurt your credit score.
Fact: Getting loan estimates from multiple lenders will not hurt your score if you complete the process within a specific time window.

Credit scoring algorithms understand that it’s smart to shop around for the best rates on a loan, not risky. Therefore, credit scores typically have ways of preventing the series of multiple inquiries that result from this process from hurting your score excessively. 

If you are applying for student loans, mortgages, or auto loans, FICO scores allow a certain time frame for you to shop around, only counting one hard inquiry to your credit report for this time period. For older FICO scores, the time window is 14 days; for newer FICO scores, the time window is 45 days.

In addition, FICO scores have a 30-day hard inquiry “buffer,” meaning that the algorithm ignores any inquiries that occurred within the past 30 days when calculating your score. 

VantageScore uses a simpler method: it groups all inquiries made within a 14-day window of each other together and counts those all as one inquiry, regardless of what types of accounts the inquiries were for.

Myth: You can fix your credit by disputing everything on your credit report.
Fact: Disputing everything on your credit report could get you in legal trouble and may not even help your credit.

If there is information on your credit report that is inaccurate, outdated, incomplete, or unverifiable, of course you would want to dispute those items with the credit bureaus. But it’s not necessarily a good idea to dispute negative items on your credit report that are accurate.

First of all, the derogatory items won’t necessarily get deleted from your credit report, especially if you don’t provide proof that they are inaccurate. They might just get updated with the correct information, or they may get deleted temporarily until an investigation determines the items are valid and they go right back on your credit report.

Furthermore, the credit bureaus don’t have to investigate disputes that are deemed “frivolous,” and they could decide that some of your disputes are frivolous if you are disputing every item in your credit file, regardless of accuracy.

Plus, lying on a credit dispute could be considered fraudulent. According to the FTC, “No one can legally remove accurate and timely negative information from a credit report.”

Even if you were to get away with disputing everything on your report, this might not necessarily help your credit as much as you hoped. If you’ve gone through an aggressive credit sweep and have nothing left on your report, then you essentially have no credit history and likely no credit score, which could be just as problematic as having bad credit.

Myth: CPN numbers can be used in place of social security numbers to create a new, clean credit file.
Using a CPN to apply for credit is a federal crime. Photo via

Using a CPN to apply for credit is a federal crime. Photo via

Fact: CPNs are illegal and using one to apply for credit is a federal crime.

Although you might have heard some people claim that “credit profile numbers” or credit privacy numbers” are a legitimate way to protect your privacy or wipe your credit slate clean, in reality, there is no legitimate or legal source for CPN numbers.

Most of the time, these numbers are either fake social security numbers that have not been created yet or real SSNs that have been stolen from children, the elderly, deceased people, people who are incarcerated, and people who are homeless. Either way, using a CPN means getting involved in identity fraud, which is a federal crime.

The Social Security Administration and the Federal Trade Commission have both explicitly stated that applying for credit using a CPN is illegal and that those who sell CPNs are scamming consumers.

Learn more about the dangers of CPNs in our article.

Myth: The credit score you check online is the same one lenders see when they pull your credit.
Fact: Lenders often do not use the same credit scores that are provided for free online.

When you check your credit score for free online, the credit score you see is most likely going to be a VantageScore. This is the score most commonly used by free online services such as Credit Karma.

The majority of lenders, however, primarily use FICO scores, although some lenders are now starting to use VantageScore. Just keep in mind that the score you see online may not be the same as the score lenders see, as there can often be a significant difference between your VantageScore and your FICO score. 

If you want to check your FICO score for free, check with your credit card issuer, since many now offer this service.

Myth: If you don’t have any debt, you will have a good credit score.
Fact: You need to use credit to build your credit score.

Having good credit doesn’t just come down to the amount of debt you have—that’s just one part of your credit score. Payment history is the most important part of a credit score, so if you’ve never had debt and you don’t have any payment history, you might not even have a credit score at all.

To get a good credit score, you have to use some form of credit and demonstrate that you can use credit responsibly by building up a positive payment history over time.

Myth: There’s no need to check your credit report until it’s time to apply for a big loan.
Fact: It’s important to monitor your credit regularly.

Waiting to check your credit score until you need to apply for credit is a mistake because there could be errors on your credit report bringing your score down. Studies estimate that about one-fifth of consumers have at least one error on their credit report, some of which could be serious enough to result in higher interest rates, less favorable loan terms, or being denied credit.

It’s important to keep an eye on your credit so that you can correct errors and fight fraud as soon as possible instead of waiting until it’s too late.

Myth: A late payment will make your score go down by 50 points.
Fact: There is no set amount of points that is associated with any particular item on your credit report. 

While it is certainly possible that a 30-day late payment could cause a 50-point drop (or more) in someone’s credit score, this is not always going to be the case. There is no fixed number of points that your score will go up or down by for each item on your credit report. Rather, the way in which a late payment affects your score is always going to depend on your individual credit profile.

There is no set amount of points associated with missing a payment.

There is no set amount of points associated with missing a payment.

Credit scoring algorithms are very complex and they incorporate hundreds of variables, such as how recent the late payment is, whether you have other late payments in your credit history, and how severe the delinquency is, not to mention the myriad other variables associated with the other categories within a credit score.

Because delinquencies on your credit report are always going to be relative to whatever else is in your file, there is a “diminishing returns” effect where the first late payment hurts your score the most and each subsequent late payment tends to have a smaller impact. Someone who has a high credit score and has never missed a payment before is going to experience a severe drop from their first missed payment, whereas someone who already has lates on their record and a lower credit score is going to be hurt less by a subsequent late payment.

According to credit expert John Ulzheimer in a blog article, “Delinquencies, like inquiries, do not have independent value… It is entirely inappropriate and incorrect to say that ‘X’ lowered my score by ‘Y’ points.”

He continues, “The late payment didn’t lower your score but because adding a late payment to a credit report moves other things around it caused your score to be different than it was before the late payment was added. If your score is 50 points lower it’s not as if the new late payment lowered your score 50 points…but because the addition of that item caused a different evaluation of EVERYTHING on your credit reports…the new reality for you is 50 points lower.”

The same principle goes for other items on your credit report as well, not just late payments.

Myth: You don’t have to worry about your kid’s credit.
Fact: You should keep an eye on your kid’s credit report, too.

The proliferation of scammers and hackers stealing people’s private information means even your kid’s credit profile could be at risk of identity theft. When people use “credit profile numbers” (CPNs), for example, these numbers are often real social security numbers stolen from children.

Make sure you monitor your kid's credit in addition to your own.

Make sure you monitor your kid’s credit in addition to your own.

You don’t want to wait until your child is grown up and ready to apply for credit to realize they have bad credit as a result of identity theft. Consider freezing your kid’s credit to prevent fraudsters from opening accounts in their name. 

Myth: Everyone’s credit score is calculated in the same way.
Fact: Credit scores have “scorecards” that categorize consumers and score them differently.

You already know that credit scoring algorithms are extremely complex, but what many people don’t know about is the “scorecards” or “buckets” within each credit scoring model. These  “buckets” consist of different categories of consumers.

For example, according to John Ulzheimer, “There are scorecards for thin files or those with few accounts, bankruptcy, derogatories, and those with clean credit files… Comparing like populations gives this population an opportunity to be considered based on [the] behavior of that group rather than a comparison to another, better group.”

The credit scoring formula is different for each bucket. In other words, items on your credit report can be treated differently based on which scorecard you fall into.

Sometimes your credit score changes in a way that you don’t expect. For example, perhaps an inaccurate collection account got deleted off of your credit report and your score went down, instead of up. This could be because you changed scorecards as a result of the deletion, causing your credit score to be calculated in a different way. Essentially, you might now be at the bottom of a different bucket instead of at the top of your previous bucket.

It’s always good to keep the concept of scorecards in mind, especially when trying to predict any kind of change to your credit score. You can never guess exactly how your score will change because of all the complexities and trade secrets that go into credit scores.


Unfortunately, there are tons of credit myths out there, and believing them may lead you to mismanage your credit and eventually end up with poor credit. We hope that this article helped to dispel many of the misconceptions about credit and helped you get started on the path to better credit.

What credit myths have you heard of? Did you use to believe any of these? We’d love to hear from you, so share your experience with us in the comments!

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What Are Credit Scores and How Can Tradelines Help?

What Are Credit Scores and How Can Tradelines Help? Pinterest graphicWhen it comes to credit scores, there’s a lot of confusion and misinformation out there. Our credit scores impact our lives in more ways than you might think, yet, unfortunately, they are complicated and difficult to understand. In this article, we’ll clear up what credit scores are, why they matter, how to build credit, and how to improve your credit score.

What Is a Credit Score?

A credit score is a 3-digit number that is meant to represent your credit risk, or how likely you are to default on a loan. This credit rating is calculated based on the information in your credit report, which lists your current and recent credit accounts.

To use an analogy, your credit report is like your school transcript: it is a list of your current and recent credit accounts and how well you did in paying them off on time. Your credit score rating is like your overall GPA: it sums up all of that credit history information into a single number.

While there are many different versions of credit scores, most lenders use a FICO credit score. Another credit score, called the VantageScore, was developed by the three major credit bureaus: Equifax, Experian, and TransUnion. The VantageScore is primarily used for educational purposes rather than lending decisions.

Both the VantageScore and the FICO credit scores range from a low of 300 to the highest score of 850. Lower numbers represent a higher likelihood of defaulting on a loan, which is considered bad credit, while higher numbers represent a lower likelihood of defaulting on a loan, which is considered good credit.

Why Is Your Credit Score Important?

If you ever want to buy something using credit instead of cash—a house or a car, for example—you’ll likely want to have a good credit score. Your credit score is what lenders use to decide whether or not they should loan you money and what the terms of that loan should be.

If you have a bad credit score or no credit score at all, you may have a hard time getting credit from lenders.

If you have a bad credit score or no credit score at all, you may have a hard time getting credit from lenders.

If you don’t have a credit score or credit history at all, lenders don’t have a way of judging your creditworthiness. Therefore, they may see you as too much of a risk and decline your request for credit.

If you do have a credit score, lenders will see it as a representation of how risky it is to lend money to you. A great credit score means you are a low-risk borrower, which means lenders can offer you low interest rates and other perks, such as credit card rewards.

On the other hand, a low credit score represents a high risk to lenders, since it shows that you may be more likely to default on a loan. To compensate for the higher risk of default, lenders charge higher interest rates and fees to those with poor credit scores—if they are willing to extend credit at all.

Your credit score doesn’t just affect your access to credit and the costs associated with using credit. Credit scores have increasingly been used for a variety of non-credit applications.

Phone carriers and utility providers may require a security deposit based on the results of your credit check.

Phone carriers and utility providers may require a security deposit based on the results of your credit check.

A significant percentage of employers do credit checks on prospective employees, so a bad credit score could cost you your dream job.
Your credit score may affect what you pay for insurance, so you’ll want to have a good credit score if you want to get the best insurance rates.
Landlords often check credit scores of applicants to see how reliable they are in paying their bills.
Utility providers and even cell phone carriers may check your credit score to determine whether to charge you a security deposit upfront.

As you can see, credit scores affect a lot more than just your ability to get credit, and it is more important than ever to prioritize building your credit score.

What Factors Determine Credit Scores?

Although the specific algorithms behind credit scores are closely-guarded trade secrets, the general categories that affect credit scores are widely known. In general, here’s what makes up a credit score:

Payment history: 35%. This is the most important piece of your credit score, so even one late or missed payment can do a lot of damage.
Utilization (how much you owe): 30%. Your utilization ratio is the ratio of the amount of debt on all your revolving accounts (e.g. credit cards) to your total available revolving credit, expressed as a percentage. Credit scores may account for both your overall utilization ratio and the utilization ratio of each individual tradeline. The lower your utilization, the better for your credit score.
Length of credit history: 15%. This category considers factors like your average age of accounts, the age of the oldest account in your credit file, and the ratio of “seasoned” to non-seasoned tradelines. A seasoned tradeline is defined as one that is at least two years old, at which point it is believed that the account begins to have a more positive impact on your credit score. The more age your accounts have, the more they will help your credit score.
The five factors that affect your credit score by Tradeline Supply Company, LLC

These five main factors affect your credit score.

Credit mix: 10%. Creditors want to see that you can responsibly use different types of credit, so they look for a variety of accounts in your credit report, including both revolving credit accounts and installment loans.
New credit: 10%. This credit score category takes into account any new inquiries and new accounts that you have added in the past 6 to 12 months. Creditors consider seeking new credit a risky behavior, so inquiries can hurt your score. Opening a new account can also have a temporary negative effect on your score since it has no age or payment history.

What Is a Good Credit Score?

Scores between 670 and above are considered good credit scores. Very good credit scores lie between 740 and 799 while excellent credit scores include scores of 800 and above.

Which credit score is the best? Only about 1% of Americans have the coveted 850, a perfect credit score.

Credit scores range between 300 and 850, with 850 being the best credit score possible.

Credit scores range between 300 and 850, with 850 being the best credit score possible.

How to Get a Good Credit Score
The most important factor of a good credit score is a history of on-time payments.

The most important factor of a good credit score is a history of on-time payments.

Here are some things that can help you get a good credit score:

A history of on-time payments
Low utilization ratios
Accounts that are at least 2 years old
A mix of different revolving and installment accounts
Minimal inquiries
Monitoring your credit report for errors

Learn more about how to increase your credit score with do-it-yourself credit repair strategies and our guide to how to get an 850 credit score.

What Is a Bad Credit Score?

According to Investopedia, credit scores of 579 or below are considered bad credit scores, with 61% of borrowers in this credit score range being predicted to become delinquent on future loans.

Credit scores in the range between 580 and 669 are considered fair because only 28% of these borrowers are predicted to become delinquent on future loans. Unfortunately, even those with fair credit scores often have difficulty getting credit and higher interest rates than those with good or excellent credit scores.

Bad credit scores can have serious consequences that reach farther than just your finances. For more on bad credit, its effects, and how to fix it, check out our article on bad credit.

Here are some things that can lead to a bad credit score:

Having too much debt can drag down your credit score.

Having too much debt can bring down your credit score.

Late or missed payments
High credit card balances
Low account age
Not enough accounts
Too many inquiries
Identity theft

How to Build Credit

To build credit, you’ll need to open your own credit accounts and keep them in good standing by always making payments on time. This is the foundation of a good credit score.

Once you build credit by piggybacking, you can open your own accounts to continue building your credit score.

Once you build credit by piggybacking, you can open your own accounts to continue building your credit score.

However, as we mentioned, it can be difficult to start building credit since lenders typically want to see a credit score and credit history before extending credit.

The fastest way to build credit, especially for those who have a limited credit history, is to piggyback on the credit of someone else. Examples of credit piggybacking include getting a cosigner or guarantor in order to qualify for credit, opening a joint account with someone, or being added as an authorized user.

Once you have started to establish a credit history by piggybacking, you can continue to build up your credit by opening up more tradelines. You can also add tradelines to your credit file that already have years of perfect payment history to help balance out the effects of any derogatory accounts.

Remember, tradelines are the foundation of building credit because all credit starts with tradelines.

How to Improve Your Credit Score

If you need to fix your credit score, there are some strategies you can use to repair your credit score yourself, such as disputing errors on your credit report and paying down high credit card balances.

Since payment history makes up the majority of your credit score, the most important thing is to get all of your accounts current and make sure to make all payments on time in the future, and your credit score should gradually recover.

When it comes to boosting your credit score, lasting results will require patience, good financial practices, and knowledge of how the credit system works. Use our free educational resources to learn more about credit scores, building credit, and how tradelines can help add credit history to your credit report.

Ready to buy tradelines? See our updated tradeline list now.

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Tradelines: What You Should Know About Building Credit

We all know that credit history is important because it’s how lenders, landlords, and sometimes even employers assess our creditworthiness. Anytime you apply for a loan or credit card, the lender will use your credit file to determine whether they think you are eligible for credit and what your interest rate will be.

But did you know that all credit is built from tradelines? Although this fact is not often discussed, it’s just as important to understand when it comes to building credit. Keep reading to find out why all credit begins with tradelines.

Building good credit may seem complicated, but it all boils down to properly managing your tradelines.

Although building good credit may seem complicated, it all boils down to properly managing your tradelines.

What Is a Tradeline?

A tradeline is any account that appears on your credit report. This includes both revolving accounts and installment loans.

Revolving accounts are accounts that can be used repeatedly without paying them off in full every month, so they may fluctuate in balance and minimum payment. Examples of revolving accounts include credit cards and home equity lines of credit. An installment loan is a loan that is repaid over time with a set number of scheduled payments, e.g. a mortgage, auto loan, or student loan.

All of these different types of accounts are tradelines. Essentially, whether you have good or bad credit depends entirely on how you manage your tradelines.

Check out “What Is a Tradeline?” and our Tradelines 101 infographic for more tradeline basics.

What Goes Into Your Credit Report?

Although each credit reporting bureau keeps the specifics of their credit scoring models a closely guarded secret, the general categories that factor into credit scores are widely known. In general, here’s what goes into a credit report, which is then used to calculate your credit score:

Credit scores are comprised of five main factors.

Credit scores are comprised of five main factors. (Click this image to pin to your Pinterest board!)

Payment history, approximately 35%: Paying the amount due on your tradelines on time every month is extremely important. Late or missed payments could result in derogatory marks that bring down your score. It’s a good idea to have several different tradelines that are in good standing since this category is weighted so heavily. If you do have a derogatory tradeline, it is important to maintain a perfect payment history on the rest of your tradelines to balance out the negative mark on your report. You always want your good history to outweigh the bad.
Utilization, or how much you owe, approximately 30%: Your utilization ratio is the ratio of how much you owe on all your revolving accounts (e.g. credit cards) to your total available credit, expressed as a percentage. Credit bureaus may consider both your overall utilization ratio and the utilization ratio of each individual tradeline. The lower your utilization, the better—it is generally recommended to keep your utilization below 30% but having it lower than this is even better. Therefore, tradelines with high utilization can hurt your score, while tradelines with low utilization can help your score.
Length of credit history, approximately 15%: This category considers factors like the average age of your tradelines, the oldest tradeline in your credit file, and the ratio of “seasoned” to non-seasoned tradelines. A seasoned tradeline is generally considered to be one that is at least two years old, at which point it is believed that the tradeline begins to have a more positive impact on your credit file. The older your tradelines are, the better impact they will have on your credit report. Since length of credit history goes hand-in-hand with payment history, together making up 50% of your credit score, generally, age is the most powerful factor of a tradeline.
Credit mix, approximately 10%: Creditors want to make sure that you can manage different types of credit, so they look for a balanced mix of different tradelines in your report. The most important thing is to have tradelines in both of the two major categories: revolving credit and installment loans.
New credit, approximately 10%: Credit scoring models take into account any new inquiries and new tradelines that you have added in the past 6 to 12 months. Generally, opening a new primary tradeline can have a temporary negative effect on your score, since it has no age and the person has not demonstrated their payment behavior on that account for very long.

Every major factor that goes into your credit file directly depends on your tradelines. Therefore, by adding authorized user tradelines, you can potentially affect each of these five factors.

Mismanaging your tradelines can lead to bad credit. Photo via

Mismanaging your tradelines can lead to bad credit. Photo via

There are a few things that could show up in your credit file that are not technically tradelines, such as collections, judgments, bankruptcies, and foreclosures. However, these bad credit items can all be thought of as the result of not properly managing your tradelines. Let’s examine each example.

A collection occurs when you have not been making payments on a tradeline and the creditor sells your debt to a collection agency.
A judgment against you happens when you default on a tradeline and a judge orders you to pay back the debt.
You might declare bankruptcy if you cannot pay off your tradelines and need to be released from the legal requirement to pay them.
Foreclosure is when a mortgage lender takes possession of the mortgaged property when the borrower fails to make payments on the mortgage tradeline.

How to Build Credit

The best way to build a good credit record is to open a variety of tradelines and keep them in good standing by making payments on time and keeping the utilization low. The fact is that you simply cannot build credit without tradelines.

Opening a credit card is a common way to establish a credit file and start building credit, but it is not the only option. Other paths to building credit include taking out student loans, auto loans, or secured loans. Unfortunately, building credit is often considered as a catch-22 because lenders are hesitant to provide credit to those with no credit history, so it can seem like it takes credit to get credit.

To overcome this obstacle, many people rely on the positive credit history of others to establish their own credit file.

Parents sometimes add their children as authorized users to their tradelines to help them build credit early.

Parents sometimes add their children as authorized users to their credit cards to help them establish credit early.

The Consumer Financial Protection Bureau estimates that about 25% of consumers first acquire credit history via an account on which someone else was also responsible. Some of these consumers open a joint account with a co-borrower, while others become authorized users on someone else’s primary tradeline.

As an example of this, parents are commonly advised to add their children as authorized users to their credit cards in order to help them establish a positive credit history early in life. In fact, it is estimated that about 20-30% of Americans have at least one authorized user tradeline in their credit file.

Unfortunately, many people do not have the same opportunity to benefit from a family member’s authorized user tradelines. Studies have shown that minorities and lower-income demographics are less likely to have authorized user tradelines, which means they are likely to face difficulty in establishing a credit history.

We are proud to help reduce financial inequality by providing equal opportunities to those who may not have a friend or family member who can provide the benefits of an authorized user tradeline.

Tradelines and Your Credit

It is crucial to be knowledgeable about credit since credit is such an integral part of your financial well-being. Since all credit is essentially built on tradelines, it is equally important to understand the way tradelines may affect your credit.

Sometimes gaining access to tradelines can be a challenge for people who are either new to credit or who have had problems in the past and are trying to re-establish their credit. Traditionally, some people have had the privilege of relying on family and friends to help share credit, but new innovations have created equal opportunities for those who may not have the same opportunity. We are proud to provide quality tradelines for sale at affordable prices at

Were you surprised to learn that all credit is built from tradelines? Let us know by leaving a comment!

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