The Surprising History of the Credit Bureaus

December 9, 2019CreditBy toptierfinancial

Most of us have credit reports assembled about us by the credit bureaus, yet few of us know about the surprising history of credit reporting.

The credit bureaus as we know them today grew from small, local organizations that formed as far back as the 1800s. In contrast, modern credit bureaus market themselves as expansive repositories of consumer information that can be used for an ever-growing number of applications.

Unfortunately, the early credit bureaus were known to use unethical tactics to collect information on consumers and sell this information to businesses.

While it may seem that the problems of these early credit bureaus have been addressed by legislation such as the Fair Credit Reporting Act, the credit reporting system still has serious flaws, some of which we highlight in “What Happened to Equal Credit Opportunity for All?”

In this article, we will explore the story of how credit reporting began, including how the credit bureaus originated and evolved into what they are today, and the many scandals that have taken place along the way.

What Is a Credit Report?

A credit report contains information about a consumer’s credit history. This includes a list of current and past credit accounts, along with the age, credit limit, balance, and payment history of each account.

It also contains identifying information such as your name, address, and social security number.

This information helps lenders evaluate the creditworthiness of potential borrowers so they can decide whether to extend credit and what the terms of the loan should be.

For more information on credit reports, see our article “Credit Reports: What You Need to Know.”

What Are Credit Bureaus?

Credit bureaus, also known as credit reporting agencies or CRAs, are the companies that gather credit-related information about consumers and distribute it to lenders—and increasingly, other types of businesses who have an interest in checking people’s credit history.

In the United States today, there are three major credit bureaus: Experian, Equifax, and TransUnion. While there are many other credit bureaus, these three companies dominate the industry.

But it wasn’t always this way. The first credit reporting organizations were a far cry from the modern credit bureaus of today, and the unsavory tactics they used to run their businesses may surprise you.

Early Credit Reporting Agencies

The first recorded group that shared credit information about consumers was the colorfully named “Society of Guardians for the Protection of Trade Against Swindlers and Sharpers,” which was founded in London in 1776. The Society produced reports for its members on the credit history of individual customers, which were often full of gossip in addition to credit information.

The earliest credit reporting “agencies” were groups of merchants who would get together to gossip about customers. Painting by Joseph Highmore, public domain.

Credit bureaus would check local newspapers for news about consumers.

Like the Society, the early credit reporting agencies were small, local organizations that were essentially groups of merchants sharing information about consumers. This allowed them to offer credit to more people and avoid lending to high-risk individuals.

These organizations were industry-specific and did not share information with each other. In 1960, it is estimated that about 1,500 independent local credit bureaus were in operation in the United States.

According to the Philadelphia Federal Reserve Board, these bureaus were “working with local lenders with incomplete and often unverifiable information.”

The bureaus didn’t just collect the information you might expect, such as name and loan information. They also gathered sensitive personal information such as marital status, age, gender, race, religion, employment history, and driving records.

The credit bureaus didn’t stop there. They checked the local newspapers for announcements of promotions, marriages, arrests, and deaths, and attached news clippings to consumers’ credit reports. They would even go so far as to ask someone’s neighbors and colleagues for testimonies about that person’s character.

Even the local “Welcome Wagon” was working undercover for the credit bureaus. This organization would surreptitiously gather information on new residents of an area under the guise of welcoming them to the neighborhood.

The “Welcome Wagon” would secretly collect information on new neighbors for the credit bureaus. Photo by John Fowler on flickr, CC BY 2.0.

The credit bureaus were focused solely on serving the local creditors that belonged to their respective organizations. As such, they typically only reported derogatory information.

Furthermore, there was no standardized way to evaluate a person’s creditworthiness. It was all based on the subjective whims and prejudices of the creditor looking at their credit file.

What’s worse is that the credit bureaus did not allow consumers to view the information that was being reported about them. There was no way for consumers to verify whether the information was correct or where it came from.

Modernization of Credit Reporting

According to the Harvard Business School paper, over the course of the 1960s, many of these small, local credit bureaus started to join together, forming networks that spanned the nation.

In 1971, the Fair Credit Reporting Act (FCRA) was passed to ensure the “accuracy, fairness, and privacy of information in the files of consumer reporting agencies.”

By establishing requirements as to the accuracy and of consumer credit files and access to their information, the FCRA was intended to protect consumers from the unfair practices that were rampant in the credit reporting industry.

The Fair Credit Reporting Act

The FCRA enacted the following rights for consumers:

Consumers must be notified if negative action is taken against them because of the information in their credit file.
Consumers must be able to find out what is in their credit file.
Consumers must be able to dispute inaccurate information and have it corrected or deleted.
Outdated information (generally more than 7-10 years old for negative information) cannot be reported.
Consumers must provide consent for employers to check their credit reports.
Consumers must have the option to request to be excluded from lists for unsolicited credit and insurance offers.
Consumers who appear on a list of prospects requested by a lender must be extended a firm offer of credit.

As a result of the passing of the FCRA, credit bureaus stopped recording events such as marriages and arrests and started focusing more on verifiable credit history information. They also started reporting positive information in addition to negative information.

In 1996, the FCRA was amended to extend additional protections to consumers, including the following:

Consumers have the right to take legal action against anyone who obtains their credit report without a permissible purpose.
Credit bureaus can be held liable for knowingly reporting misinformation.
Credit bureaus must investigate disputes within a certain period of time, usually 30 days.
Banks can share credit information with affiliates, but consumers must be given the opportunity to prohibit this sharing of their information.

The transition to computerized databases allowed some credit bureaus to expand and dominate the industry.

The advent of computer-powered databases allowed some credit reporting agencies to become more efficient and do more business, while smaller agencies that could not afford to make the change got out of the industry.

This consolidation eventually led to the domination of the market by the three major bureaus we know today.

Experian

While Experian did not officially come about until 1996, according to creditrepair.com, the story of Experian can be traced back almost 200 years.

The Manchester Guardian Society was formed in England in 1826 to share information on customers who didn’t pay their debts. This organization eventually became a part of Experian, as did a group of merchants that later formed in Dallas for a similar purpose.

These groups were both acquired by TRW, an engineering and electronics conglomerate that also launched their consumer credit reporting branch as Experian.

Experian was acquired by the British retail company Great Universal Stores Limited (GUS) and became part of their consumer credit reporting arm. In 2006, it demerged from GUS and began trading on the London Stock Exchange.

Although Experian as we know it today did not come along until after the FCRA was passed, the bureau has certainly not been free of controversy.

In 1991, a TRW investigator incorrectly reported that 1,400 people in Vermont had not paid their property taxes, which ruined the credit of those consumers. Several similar cases were discovered throughout New England.

Experian became infamous for their atrocious customer service and was hit with several lawsuits.

Later, Experian settled with the Federal Trade Commission (FTC) for operating a credit reporting scam in which consumers were led to believe they were signing up for a “free credit report” and were not told that they would automatically be enrolled in Experian’s $80 credit monitoring program.

The offending for-profit website, FreeCreditReport.com, is still in operation. As a reminder, the only site authorized to provide free credit reports as required by federal law is annualcreditreport.com.

They settled with the FTC again in 2005 for violating their previous settlement.

In 2015, Experian announced a data breach that existed for over two years and affected as many as 15 million consumers.

The bureau was then fined $3 million in 2017 for deceiving customers about their credit scores, along with TransUnion and Equifax.

TransUnion

TransUnion originally began as the holding company for a rail transportation equipment company in 1968. One year later, they entered the credit reporting industry by acquiring regional credit bureaus. The bureau has expanded steadily since then, although it is the smallest of the three major credit bureaus.

TransUnion has also been guilty of taking advantage of consumers.

Two consumers have sued TransUnion for refusing to remove inaccurate information on their credit reports.

They have also been accused of scamming consumers by not notifying them that they would be charged $18 a month for having a TransUnion account.

In June 2017, the largest FCRA verdict to date forced TransUnion to pay $60 million in damages to consumers who were erroneously included on a government list of terrorists and security threats.

Later in 2017, one of TransUnion’s websites was hijacked and made to redirect consumers to websites that attempted to download malware onto visitor’s computers.

Equifax

Equifax was started as Retail Credit Company by a grocery store owner. Photo by Charles Bernhoeft, public domain.

Equifax was started in 1898 by a grocery store owner who created a list of creditworthy customers and sold the list to other businesses. This business grew and became known as the Retail Credit Company.

The company expanded quickly throughout North America, amassing credit files on millions of Americans by the 1960s.

The Retail Credit Company developed a reputation for collecting extensive personal information on consumers and selling it to just about anyone who wanted it.

Critics accused them of reporting “facts, statistics, inaccuracies and rumors’…about virtually every phase of a person’s life; his marital troubles, jobs, school history, childhood, sex life, and political activities.”

Buyers of these reports would use them to judge the morality of individuals and avoid lending to those who they perceived as morally corrupt.

Consumers were not allowed to see their information, and many had no idea that the company had files on them in the first place.

When the company started planning to computerize their records, which would make consumer information more widely available, the U.S. Congress intervened, holding hearings that led to the Fair Credit Reporting Act being passed.

Equifax had to stop scamming consumers by lying about their identity and their motives when collecting information, among many other changes.

The Retail Credit Company changed its name to Equifax in 1975, which many speculate was a move to improve their damaged reputation after the congressional hearings.

Unfortunately for consumers, Equifax’s issues didn’t end with the Fair Credit Reporting Act. In recent years they have betrayed consumers’ trust even more egregiously.

Equifax ruined their reputation again in 2017, when their systems were breached by hackers twice, impacting hundreds of millions of consumers in the United States, Canada, and Britain.

The scam left the names, social security numbers, birth dates, addresses, driver’s license numbers, and credit cards numbers of consumers exposed for months, from May 2017 until July 2017.

Not only that, but Equifax did not disclose the breach until September of that year, giving top executives plenty of time to sell their shares of the company before going public with the announcement.

They continued to bungle their response to the breach by setting up websites that were supposed to allow consumers to determine whether they were affected by the Equifax breach but instead returned random results.

In addition, Equifax was allowed to charge fees for credit freezes in many states, which gave them the opportunity to actually make money off of this breach.

Nearly two years later, Equifax has still not been penalized or held accountable for this horrific failure in any way. In fact, they just went back to selling credit monitoring, and they are now making more money than ever.

For a fascinating in-depth investigation of the 2017 Equifax breach, listen to the podcast “Breach.”

There is virtually no end to the list of disastrous errors committed by Equifax, but here are some more of the highlights:

The bureau repeatedly tweeted a link to a fake Equifax phishing website, directing consumers to enroll in fraud prevention services at the imposter site.

Equifax left their systems vulnerable to a series of cyberattacks that affected hundreds of millions of people.

Equifax left the private data of approximately 14,000 Argentinian consumers and staff members open to anyone who entered “admin” as the username and password for one of its online portals.
The company removed its mobile apps from app stores in 2017 because they had security flaws that left them vulnerable to cyber attacks.
A website operated by Equifax exposed the salary histories of tens of thousands of people to anyone that had someone’s Social Security number and date of birth, both of which were in the hands of criminals after the security breach.
In October 2017, Equifax’s website was hacked and made to serve malware disguised as a software update, leaving visitors to the site at risk of having their computers infected by the malware.
The company has been sued hundreds of times and fined millions of dollars by the Federal Trade Commission for violating the FCRA.

Sadly, it seems Equifax has not changed for the better since their early days of selling people’s private information to anyone and everyone, since they have allowed criminals to easily access consumer data on a massive scale.

Innovis: The Fourth Credit Bureau

Many people are completely unaware that there is actually a fourth major credit bureau called Innovis. It was founded as Associated Credit Bureaus in 1970 and changed its name to Innovis in 1997. The company is now owned by CBC companies, which purchased Innovis in 1999.

In contrast to the other consumer reporting agencies (CRAs), credit reporting is not the primary function of Innovis. In fact, Innovis does not even offer credit scores.

Innovis instead serves businesses by providing “consumer data solutions” such as identity verification, fraud prevention, receivables management, and credit information. According to finance writer Sarah Cain, Innovis’ credit reports are used primarily to compile lists of pre-approved consumers to sell to lenders for marketing pre-screened offers.

Innovis also states on their website that as a CRA, they “enable” personal solutions such as credit reports, credit disputes, fraud alerts, active duty alerts for consumers in the military, credit blocks, security freezes, and opt-outs.

What Is In Your Innovis Credit Report?

Your Innovis report, like your other credit reports, contains your personal information as well as your credit history. However, they do not receive credit information from all of the same lenders that report to the other three major credit bureaus. If you pull your Innovis credit report, you may notice that some of your credit accounts are missing, particularly revolving accounts.

Your credit report will also show inquiries if any businesses have pulled your file from Innovis.

While you can’t get your Innovis credit report from annualcreditreport.com, you can order a copy directly from the company for free once a year.

Who Uses Innovis Credit Reports?

While there are some anecdotal reports of credit card companies pulling consumers’ Innovis credit reports for lending decisions, it seems that their reports are used mostly for pre-screened marketing offers. Innovis’ services are also used by companies such as cell phone service providers.

Is CBCInnovis the Same Company?

Confusingly, there is another company owned by the same parent company as Innovis called CBCInnovis. Although CBCInnovis and Innovis share similar names, they are different companies with different functions.

Unlike Innovis and the other credit bureaus, CBCInnovis does not maintain a repository of consumer credit data. Rather, it serves as a third-party company that pulls consumers’ credit reports from Experian, Equifax, and TransUnion and compiles the information into one “tri-merge” credit report. These tri-merge reports are sold to lenders such as banks and mortgage companies.

Discrimination in Credit Reporting

Unfortunately, historical discrimination is still baked into the credit system.

You might think that discrimination in the credit system is a thing of the past, left behind with the shady information-gathering tactics of the earliest credit bureaus.

Unfortunately, although discrimination is officially prohibited by the Equal Credit Opportunity Act, inequality is still rampant in the credit industry today.

Past and present discrimination against minorities in the United States affects consumers in ways that have dramatic effects on credit scores. A study by the Federal Reserve Board revealed that on average, blacks and Hispanics have lower credit scores than non-Hispanic whites and Asians, even after controlling for personal demographic characteristics, location, and income.

The credit system further burdens those who are less privileged and provides very few opportunities for disadvantaged consumers to improve their situation.

Conclusion on the History of Credit Reporting

Credit reporting agencies have a surprisingly long and sordid history. From the 1800s to today, the consumer credit reporting industry has been plagued with bias, inaccuracies, and serious security issues.

While technological advancements have allowed the credit bureaus to expand and improve, and government regulation has been enacted to protect the rights of consumers, the system is still far from perfect.

Ultimately, the credit bureaus were built to serve lenders, not consumers, and that remains their primary purpose. We are reminded of this every time consumers are harmed by the incompetent or even outright malicious actions of the credit bureaus.

Have you been affected by a credit reporting scam or a security breach? Let us know in the comments, and please share this article if you liked it!

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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.

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What Happens to Your Credit When You Get Married or Divorced?

November 26, 2019CreditBy toptierfinancial

Many people are uncertain about what may happen to their credit when they get married and what can happen to their credit if they get divorced.

For example, it is commonly believed that your credit report merges with your spouse’s credit report when you get married.

Is that really true? And what happens to your credit when you get divorced?

Keep reading for an in-depth explanation of what happens to your credit score when you get married or divorced.

What Happens to Your Credit When You Get Engaged

Technically, nothing directly happens to your credit score as a result of getting engaged. However, becoming betrothed to your future spouse can come with pressure to go into debt, and can thereby indirectly affect your credit.

Financing the Engagement Ring

The first major purchase for a couple planning to marry is often the engagement ring or rings. Many people still hold onto “traditional” ideas about how much one “should” spend on an engagement ring and want to be able to purchase an expensive ring for their partner. The average cost of an engagement ring in 2019 is nearly $6,000!

Those who don’t have the cash on hand to pay for a lavish ring may feel that they need to finance one in order to please their partner or keep up with the Joneses, but be mindful of the impact this could have on your credit.

If you want to take advantage of an in-house financing plan at the store where you are purchasing the ring, you’ll likely have to open a retail credit card with the store. The inquiry on your credit report might ding your credit score by a few points, and the new retail card account will lower your average age of accounts, which is also likely to affect your score.

In addition, if the credit limit of the store card is close to or the same price as the ring, then your individual utilization ratio will be very high or maxed out on that account, and it will also contribute to an increase in your overall utilization ratio. This makes you look riskier to lenders and thus has a negative impact on your credit score.

Before financing an engagement ring, make sure you know how it could affect your credit.

Another way to finance an engagement ring is to take out a personal loan. Taking out an installment loan is generally less damaging to your credit score than opening a new revolving account such as a credit card and maxing it out immediately. However, the downside of taking out a loan to pay for the ring is that you will have to pay interest on top of the price of the ring, whereas with in-store financing you may be able to take advantage of an interest-free promotional offer.

Regardless of how you may choose to finance the jewelry, unfortunately, going thousands of dollars into debt for a ring can bring down your credit score, especially if you become overextended and can’t keep up with the payments.

Paying for the Wedding and Honeymoon

While the cost of an engagement ring can certainly get quite expensive, it typically pales in comparison to the cost of the wedding ceremony and reception.

Planning a wedding involves paying for a venue, catering, photography, flowers, invitations, and much more, and all those expenses can add up quickly. In 2018, the average amount spent on weddings in the United States, not including the cost of the honeymoon, was almost $34,000.

While it used to be commonly expected for parents to foot the bill for weddings, now, spouses-to-be are increasingly paying their own way, even if that means going into debt. Business Insider recently reported that 28% of American couples go into debt to pay for their weddings.

The expenses don’t stop there if you want a traditional honeymoon, which can add several thousand dollars to the total—over $5,000, on average.

The average cost of a wedding in the U.S. is over $30,000, and many couples resort to taking out loans to pay for their nuptials.

Needless to say, on top of the staggering amounts of student loan debt that many couples are already saddled with, spending money you don’t have to shoulder the astronomical cost of a wedding can lead to even more credit struggles.

How Does Marriage Affect Credit?

Although many people seem to believe that your credit report combines with your spouse’s credit report after you tie the knot, this is a misconception. After you get married, both parties still retain their individual credit histories and credit scores. Your partner’s accounts will not be added to your credit report and vice versa.

There is no such thing as a shared credit score for married couples. In fact, your credit report will not even indicate your marital status or your spouse’s name.

Does Marriage Affect Your Credit Score?

No, getting married does not directly affect your credit score. Since your credit report does not change when you get married, neither does your credit score.

However, just like when you get engaged and plan your wedding, your credit may be indirectly affected by your marriage due to financial actions that you may take as a married couple.

Applying for a Mortgage

One of the most important financial decisions a couple can make is whether to apply for a mortgage to buy a home and, if so, whether both parties will apply jointly or whether the spouse with the best credit score will apply individually.

If you get a joint mortgage with your spouse, make sure you are on the same page about who will be responsible for making payments.

If both you and your partner have already established a credit history before entering the marriage, then it is likely that you will have different credit scores. In some cases, your scores may be in the same credit score range, while in others, the gap may be substantial. Ideally, all couples would do well to discuss finances before committing to marriage so that no one is surprised by a bad credit score after you have already taken the plunge.

If one spouse has bad credit while the other does not, the lower credit score could damage your chances of getting approved for a mortgage or getting the best rate on your loan. In this case, it might be a better idea for the spouse with good credit to apply in their name only, or else you could end up owing tens of thousands of dollars more on your mortgage thanks to a higher interest rate.

On the other hand, if your credit scores are similar, then it would probably make sense to apply for the home loan jointly. Assuming both partners have decent credit, then applying for a joint mortgage may offer certain advantages. Namely, both your income and your partner’s income will be considered, which could allow you to apply for a larger loan than if you were just relying on one person’s income.

While getting a mortgage is certainly a huge milestone and financial commitment, since it is a type of installment loan, having a lot of mortgage debt won’t affect your credit as much as revolving accounts do.

However, it’s how you and your spouse manage the mortgage together that can have a significant impact on your credit. With a joint mortgage, both parties are responsible for paying the bill on time. If your partner is in charge of paying the mortgage bill and one month they miss the due date and get a 30-day late, since you are equally responsible for the joint account, that late payment will also show up on your credit report and can bring down your score.

Opening Joint Credit Accounts

Besides applying for a joint mortgage, there are other types of joint credit accounts that married couples may open together, such as joint credit cards or joint auto loans.

This can allow couples to more easily manage their shared finances together. As we discussed in “The Fastest Ways to Build Credit,” if one spouse doesn’t have the credit score to get approved for an account on their own, then applying for a joint credit account with their partner can be a good way to help them build credit.

As with a joint mortgage, opening any other type of joint credit account together means you can both be held fully responsible for the debt. That can be a risky move since it means you can be held accountable and your credit score will suffer the consequences if your partner shirks their financial responsibilities.

Credit piggybacking as an authorized user can help build credit if one spouse’s credit file is thin or less than perfect.

Becoming an Authorized User

When one spouse has better credit than the other, then the partner with good credit can add the other as an authorized user to one or more of their credit cards with positive payment history.

This practice, known as credit piggybacking, often results in the age and payment history of that positive account being added to the credit report of the authorized user. This can be a great way for a spouse to help their partner build credit.

In addition, unlike opening a joint account, it’s low-risk for the authorized user, who can remove themselves from the account at any time if the relationship goes south or the account becomes derogatory.

Does Divorce Hurt Your Credit Score?

Although no one goes into a marriage planning to get divorced later on, unfortunately, divorce is a reality for many couples. To protect your credit, it’s important to be realistic about the possibility of divorce and to keep it in mind when making financial decisions.

Now, let’s answer the question of whether getting divorced can hurt your credit.

If you have been operating under the belief that your credit report merges with your spouse’s when you get married, then you might have assumed that getting a divorce will hurt your credit. However, as we have seen, the act of getting married itself does not affect your credit. It’s how you manage your credit that determines how your credit score might change.

Getting a divorce can be very costly, but if you want to keep your credit in tact, don’t neglect your other bills.

The same idea applies when getting a divorce. Your change in marital status will not be shown on your credit report and will not have any bearing on your credit score. However, it is certainly possible that getting divorced from your spouse can affect your credit by other means.

The Cost of Getting a Divorce

Since you’ll most likely need to hire legal counsel, unfortunately, getting a divorce can often be quite costly. This can make it more difficult to keep up with the rest of your bills. Do whatever you can to pay all of your bills on time so that you don’t end up with any minor or major derogatory items on your credit report.

If you’re really struggling to stay afloat financially in the midst of a divorce, reach out to your creditors and ask if there are any ways in which they can accommodate your situation in this time of financial hardship. For example, some lenders may be willing to lower your payments temporarily or even let you postpone a few payments.

In addition, you could also consider getting a personal loan to help pay for your expenses until you can get back on your feet financially after your divorce.

Managing Your Joint Accounts While Going Through a Divorce

As we discussed previously, many married couples may end up with joint credit accounts, such as a mortgage, an auto loan, or joint credit cards. Getting a divorce doesn’t nullify the debt or release either party from financial responsibility. It’s a legal agreement between you and your ex-partner, not with your creditors. Your joint debts still need to be paid.

In a divorce, it can be hard to resolve who will be responsible for paying off the debt and canceling joint accounts, especially if there are strong emotions at play.

A divorce agreement may dictate who is responsible for paying joint bills, but your lenders can still hold both of you responsible for the debt.

Although a judge may assign certain debt repayment responsibilities to each party, again, this is not an agreement with the lenders, who care only about whether your bills get paid, not who pays them. Both of you can still be held liable for joint debts by the lenders.

If your ex agrees in court to pay off a joint account but doesn’t follow through, those missed payments can damage your credit score just as much as it hurts their own. If the account goes into collections, that could be disastrous for your credit.

Since you may not trust your ex to responsibly manage shared credit accounts, you’ll probably want to pay off and close any joint accounts as soon as possible.

Unfortunately, most lenders don’t allow one person to be removed from a joint account, so you can’t simply convert it to an individual account. Instead, you will most likely need to close the account altogether and then apply for a new account on your own.

As you may know from our article about closed accounts, closing an account hurts your credit utilization. If you have to close any joint credit cards that you had with your ex-spouse, for example, the credit limit of those cards will no longer be factored into your overall utilization ratio. As a result, your utilization is going to go up and your credit score likely could go down, since credit utilization is 30% of your FICO score and about 20% of your VantageScore.

Ideally, you and your ex could decide how to assign responsibility for your joint debts outside the courts. If all goes smoothly when divvying up and paying the debts during your divorce proceedings, then your credit could theoretically remain unscathed aside from the hit to your credit utilization.

However, things can get messy quickly if there is any conflict as to who should pay certain bills.

If your ex decides they don’t want to make payments on a debt that they were supposed to pay, or even if they simply make a mistake and forget to pay, then your credit will suffer from those missed payments unless you pick up the slack. Since payment history is the biggest factor in your credit score, this situation has the potential to destroy your credit.

If your ex-spouse misses a payment on a joint debt, that negative mark will also affect your credit.

Let’s say you didn’t know your ex was behind on payments and the account went to collections. Then you would have a major derogatory on your credit report, through no fault of your own!

What Happens to a Joint Mortgage When You Divorce?

Resolving the question of what happens to your joint mortgage after your divorce can also get tricky, but there are several options to consider. Each of these options will likely affect your credit but in different ways.

Option 1: Sell the House

If you and your ex-spouse agree to sell the home, you can use the proceeds from the sale to pay off the joint mortgage and then go your separate ways. In this situation, by paying off the mortgage early, you cut out the risk of either party missing mortgage payments down the road and damaging your credit.

Some states have community property laws that may necessitate selling the house in order to split up everything you and your spouse owned together unless both of you can reach an agreement on how to divvy things up.

The downside of selling the house is that now both of you will have to find somewhere else to live, and buying another house when you’re divorced can be a challenge, as we will elaborate on below.

Depending on how the housing market is doing when you get divorced, it’s possible that you could end up owing more on the mortgage than the house is currently worth. In this case, your bank might agree to a short sale, where you sell the house for an amount that is less than what you owe toward your mortgage.

Often, the simplest solution for dealing with a joint mortgage after a divorce is selling the house and using the proceeds to pay off the mortgage.

Unfortunately, a short sale is considered a settlement, which means it is a major derogatory item on your credit report, so a short sale should be your last resort if the goal is to preserve your credit.

Of course, selling the house is not always possible, as one spouse may want or need to stay in the home, which brings us to the next possibility for dealing with your joint mortgage.

Option 2: Refinance the Mortgage in One Spouse’s Name

If someone needs to remain in the home, then the joint mortgage will have to be refinanced in one person’s name. This requires that one party has enough income and an adequate credit score to qualify for a mortgage on their own.

If your credit is not quite where it needs to be to refinance the mortgage in your name alone, you could try to boost your credit score with some quick fixes such as decreasing your credit utilization or increasing your credit limit. Then you can request a rapid rescore from your mortgage lender to see an immediate increase in your score.

Ideally, the person who will continue to live in the home would be the one refinancing the mortgage in their name. This removes the liability from the spouse who is no longer living in the home, meaning that if the new sole mortgage owner fails to make on-time payments, the other person’s credit will not be punished for it.

However, this is not always the case. When the opposite is true, i.e. the spouse not living in the home becomes responsible for the mortgage, there can be problems. For example, if you are the one staying in your home and your spouse is supposed to pay the mortgage, but instead, they default on the loan, you could be at risk of your house being foreclosed by the bank, even though you weren’t at fault for the missed payments.

Option 3: Buy Out Your Spouse and Keep the Home

In some states, the equity of a shared home is split between the two parties in the event of a divorce.

If this is the case for you and you want to keep the house, you can try to raise enough cash to buy out your spouse’s portion of the equity in the home.

To raise funds, you could apply for a home equity loan, which is essentially a second mortgage. Alternatively, you could take out a personal loan. Of course, getting approved for a personal loan will be dependent on your credit and income, since it does not use your home as collateral.

Option 4: Keep the House and the Existing Mortgage

Keeping the joint mortgage and continuing to live in the home with your ex-spouse may not be ideal, but it could save you some money.

In some situations, it may be most practical or even necessary to continue cohabitating with your ex-spouse and keep the mortgage as-is. Although this arrangement is obviously not ideal, it could give both parties some extra time to get their credit in shape to either refinance the mortgage or sell the home and buy a new home.

Buying a New Home When You’re Divorced

In going through a divorce, there’s a good chance you’ll have to move out of your house and find a new home. Unfortunately, according to Forbes, if you have recently gotten divorced or are currently undergoing divorce proceedings, this can affect your chances of qualifying for a mortgage.

Since one of the important factors that mortgage underwriters look at is your debt-to-income ratio, it can be difficult to get approved for a mortgage on a second house when you’re still paying off another mortgage.

Therefore, if your ex-spouse cannot refinance the mortgage in their own name, then you may have to wait until you sell the home that you shared with your ex-spouse before trying to get a loan to buy a new place.

How to Rebuild Credit After Divorce

If your credit has taken a beating as a result of your divorce, the good news is that there are steps you can take to repair your bad credit.

Pay all of your bills on time to help rebuild a positive credit history, increase your credit age, and outweigh any derogatories that you may have gotten.
Consider getting a secured credit card or a credit-builder loan to establish primary accounts in your name.
Get added as an authorized user to a seasoned tradeline. This can add years of credit age and perfect payment history to your credit report.

Options for rebuilding credit include applying for a credit-builder loan, getting a secured credit card, and being added as an authorized user to a seasoned tradeline.

For more tips on how to reestablish good credit, check out our articles on bad credit, DIY credit repair basics, the fastest ways to build credit, or any of the articles in the credit score and credit repair section of our Knowledge Center.

Conclusions on How Getting Married or Divorced Can Affect Your Credit

By now, you know that the myth that you and your spouse merge credit reports when you get married is not true and that neither getting married nor getting divorced have a direct impact on your credit. However, there are a multitude of ways in which your marital status can indirectly affect your credit.

Firstly, getting engaged and planning a wedding may often mean going into debt in order to pay for the rings, the wedding ceremony and reception, and the honeymoon. This can affect your credit utilization ratio, and if having all that debt leaves you overextended, then you could end up missing payments and getting some derogatory items on your credit report.

Once you are married, your credit will be affected by any joint accounts you and your spouse open together, such as a mortgage. It’s important to be on the same page as your spouse when it comes to managing joint accounts in order to reduce the risk of your credit being damaged by your spouse’s mistakes (and vice versa).

It is true that many people struggle with their credit after getting a divorce, not because of their divorced status per se, but because legally separating from your spouse is expensive, and it creates complications for your joint credit accounts that can be difficult to resolve.

However, you don’t have to let a divorce ruin your credit. Try to come to an agreement with your ex-spouse about how to split up financial responsibilities. If your credit does take a hit during your divorce proceedings, you can rebuild your credit by becoming an authorized user and opening up new primary accounts in your name.

Read more: tradelinesupply.com

Don’t I Have the Right to a Credit Report?

November 1, 2019CreditBy toptierfinancial

When consumers ask me questions about their credit reports it’s normally about how to get an item removed or corrected. Sometimes, however, I do get questions about having information added to a credit report. This type of question brings up an interesting concept, which is whether or not consumers have the right to certain credit report information or even the right to a credit report at all.

The Fair Credit Reporting Act

The Federal statute that governs the credit reporting agency’s actions, the use of credit reports, and the furnishing of information to the credit reporting agencies is the Fair Credit Reporting Act or “FCRA.” The FCRA is a consumer protection statute that has been around since the early 1970s and confers rights to consumers as it pertains to their credit reports. The Act has been amended dozens of times.

There is no language in the FCRA that affirmatively gives consumers the right to have a credit report. And, there’s also no language in the FCRA that gives consumers the right to demand that they do not have a credit report. The act is silent on those two issues.

The Voluntary System

What this means is you cannot demand that a credit reporting agency push a button, delete your credit report information, and then never again collect information about your credit obligations. Conversely, you also cannot force a credit reporting agency to reach out to your bank or other service providers, get information about how you manage your accounts, and then add them to your credit reports.

Your credit scores might not be the same.

There are some very limited scenarios with federally guaranteed student loans and their servicers. The loan servicers may be required by the Department of Education to credit report debtor obligations, but that’s not the same as a lender choosing to report, or not to report. That’s entirely voluntary.

From a more granular perspective, you also don’t have the right to identical credit reports and certainly, you don’t have the right to identical credit scores across the credit reporting agencies and the various brands of credit scores. So, you cannot demand that your credit reports at Equifax, Experian, and TransUnion be the same and you cannot demand that your FICO and VantageScore credit scores are identical.

In fact, you don’t even have the right to a credit score, at all. There are certain minimum criteria that must be met before your credit report will even qualify for a credit score. When your credit report is created, a process that normally occurs the first time you apply for credit, it will not qualify for a credit score because there isn’t enough information to make it scorable.

Consistency, or Inconsistency

Another interesting aspect of credit reporting and our control (or lack of control) over what goes on and what does not go on our credit reports is the issue of consistency. For example, I can be added as an authorized user on Credit Card A and also added as an authorized user on Credit Card B, and there’s no guarantee that both card issuers will choose to report the account on my credit reports.

There’s also no guarantee that the issuer of Credit Card A will credit report all of their authorized users. They may choose to report some of them, and then choose to not report the rest. There’s nothing I can do about this. There’s nobody to complain to about the consistency issues and you can’t leverage your rights to consistency, because you don’t have any.

You also cannot control whether or not any of your lenders report to all three of the credit bureaus. For example, you may have a lender that reports to Equifax, but not to Experian and TransUnion. You can come up with any number of other combinations, and those would be true as well.

Not all credit card issuers report authorized user data to the credit bureaus.

This can be an issue with the use of secured credit cards, which are a common tool used by consumers to build or rebuild their credit. Notwithstanding the fact that becoming an authorized user on a loved one’s credit card is a much better alternative, there’s no guarantee that your secured card issuer will report to any of the credit bureaus.

Users of Credit Reports

There’s one final issue to cover on this topic of consistency. The users of credit reports, as in lenders and debt collectors, also don’t have the right to use credit reports or to furnish information to any of the credit bureaus. All users of credit reports had to apply for service with the credit bureaus and then go through a process of consideration and evaluation by the credit bureaus before their accounts were approved.

And even if a company has an account with the credit bureaus, buys credit reports, and furnishes information to the credit bureaus there’s no guarantee that they will always have that account. The credit bureaus can choose to stop doing business with a lender or a debt collector. They can also choose to purge data provided by a former client. And like consumers, there’s nothing they can do to force a credit bureau to change their mind.

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.

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How Are Authorized User Tradelines Considered by Credit Scoring Systems?

September 2, 2019CreditBy toptierfinancial

One of the more common questions I receive from consumers is how they can best establish credit or improve their credit scores. It’s a hard question to answer without seeing their credit reports. There are many paths to poor credit scores so the advice isn’t as simple as one universal answer. The answer is going to vary based on each consumer’s individual credit situation.

As to the “how can I establish credit” question, that one is certainly easier to answer because there is a finite number of options to choose from when building or rebuilding a credit report and a credit score. My favorite option is the same one my parents used some 33 years ago when I was 18 years old and headed off to college. My father added me as an authorized user on one of his credit cards.

If you’re not familiar with authorized users, you can read more about them here. Or, I can save you some time; an authorized user is someone who is added to the credit card account of another person. The authorized user has the same spending permissions as the primary cardholder, but without any of the payment or debt liability. Almost all large credit card issuers will allow their primary credit card holders to add authorized users to their accounts.

The upside to being an authorized user is most credit card issuers will report the history of the credit card account to your three credit reports as maintained by Equifax, Experian and TransUnion. This means not only will lenders see the account on your credit reports but, also, credit scoring systems will consider it when calculating your credit scores.

Authorized Users and Credit Scoring

All commonly used credit scoring systems will consider an authorized user account or “tradeline” as a scored attribute. In English that means if you’re an authorized user on someone else’s credit card account and that account is reported or “furnished” to the three consumer credit reporting agencies, and it ends up on your credit reports, then it will be considered in the calculation of your credit score.

In most scenarios an authorized user credit card account is treated no differently than if you were the primary cardholder. The balance, the credit limit, the age of the account, and the account’s payment history would be treated no differently. If all of those credit card attributes say good things about you, the card will likely help your credit scores. And conversely, if the card is mismanaged then you too will likely suffer a credit score impact, just like the primary cardholder.

There was a time many years ago when authorized users were being abused as a credit repair strategy to temporarily boost consumer credit scores. The response…in June of 2007 the primarily used credit scoring company announced that they would no longer count authorized user accounts in their upcoming credit scoring system. The reason they gave was that by no longer counting authorized user accounts in the calculation of a credit score they would be protecting lenders from the practice of piggybacking on someone else’s credit card account.

Thankfully the company reconsidered their position after consulting with the Federal Reserve Board and the Federal Trade Commission. Instead of simply ignoring authorized user tradelines, the company instead implemented logic into their future credit scoring models that reduced the potential impact from piggybacking. [1] The specifics as to the exact treatment of authorized user tradelines by these newer credit scoring systems have never been publicly disclosed.

How Authorized User Tradelines are Helpful

Assuming an authorized user tradeline makes its way to your credit reports, it can be helpful in a variety of ways, which I alluded to above. First and foremost, lenders like to see positive information on credit reports, and that has nothing to do with your credit scores.

If the authorized user account is old, it will help to increase your average age of accounts, which is an important factor in your credit scores. If the authorized user account has a clean payment history, that is helpful to your credit scores. And, maybe most importantly, if the authorized user account has a low balance relative to the credit limit, that is very helpful to your credit scores.

Really the only way an authorized user account can hurt your credit scores is if you choose to associate yourself with a poorly managed account. For example, you’d never want to have your name added to an account that had a history of late payments. And, you’d never want to associate your name with an account that has a large balance relative to the credit limit. These are score damaging qualities of a tradeline, which would certainly point your credit scores in the wrong direction.

[1] From the Written Statement of Fair Isaac Corporation before the U.S. House of Representatives Committee on Financial Services Subcommittee on Oversight and Investigations.

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.

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Watch Out for These Tradeline Myths

July 12, 2019CreditBy toptierfinancial

The tradeline industry is full of rumors, myths, and inaccuracies. Since we aim to educate consumers on how tradelines work and how the credit system works, we want to dispell some of these common myths about tradelines.

The Equal Credit Opportunity Act prohibits credit discrimination and helps protect authorized users tradelines.

1. Tradelines Are Illegal

Unfortunately, many people immediately discount the idea of using tradelines because they believe the pervasive myth that tradelines are illegal.

The reason this myth exists is that FICO stated in 2008 that the FICO 9 credit score would eliminate the benefits of authorized user tradelines for credit piggybackers by somehow distinguishing between “real” authorized users and those who just want to use AU tradelines to build their credit profile.

However, the Equal Credit Opportunity Act (ECOA) prevents this kind of credit discrimination, and FICO admitted to Congress that this action would illegally violate ECOA. Thus, FICO was forced to reverse its decision.

It seems that many people assumed that since the issue of tradelines went all the way to Congress, they must have been banned, but that is not the case. To the contrary, Congress actually protected the ability of consumers to use authorized user tradelines.

As further evidence that tradelines are legal, the banks themselves actually promote the practice of becoming an authorized user for the specific purpose of boosting your credit score.

2. Tradelines Don’t Work Anymore

This is another myth that arose out of the FICO controversy in 2008. Since FICO claimed that their new credit scoring model would be able to differentiate between traditional authorized users and those trying to “game the system,” many people assumed that this meant AU tradelines wouldn’t work anymore.

However, as we discussed above, FICO was not legally able to go through with this plan, which means anyone can still take advantage of the benefits of user tradelines.

ECOA protects authorized users from being discriminated against, so AU tradelines are here to stay.

Plus, even if FICO does manage to come out with a score designed to punish piggybackers in the future, it will likely take years or even decades for lenders to start using the new score.

If you are not convinced that tradelines still work, we recommend reading our article, “Do Tradelines Still Work in 2019?”

3. Tradelines Are Unethical

Some people think that it is unethical to buy or sell tradelines because they believe that people who buy tradelines are artificially boosting their credit score and can therefore obtain credit that they are not really qualified for.

Firstly, is it unethical to try to boost one’s credit score using legally allowable methods?

People take actions to boost their credit scores every day, such as asking for credit limit increases, taking out new loans to establish more lines of credit, asking their banks to forgive late payments, paying down credit card balances multiple times a month to keep the utilization low, just to name a few.

Becoming an authorized user for the purpose of building credit is just one of many common methods that people use to try to improve their credit.

You have probably even tried several of these techniques yourself. Therefore, it seems that the majority of people do not believe that it is unethical to manipulate credit scores within the legal limits of the law.

In addition, studies have shown that about a third of people have authorized user accounts in their credit profiles and that those authorized user accounts tend to be superior tradelines to the primary accounts in their own name, which means about a third of people are already benefiting from credit piggybacking.

However, minorities have fewer authorized user accounts and benefited less from them compared to whites.

Creating a marketplace where affordable tradelines can be bought and sold helps to create more equal credit opportunity for those who have historically been disadvantaged by an unfair system.

Read “The Ethics of Tradelines” for an extended discussion on this topic.

4. Tradelines Are Expensive

One of the common complaints about tradelines is that they are expensive. Historically, tradelines were only available to the wealthy and privileged due to their high cost.

That may still be true for a lot of tradeline companies, but Tradeline Supply Company, LLC has been a leader in revolutionizing the tradeline industry and making tradelines affordable for everyone.

Our fully automated online platform allows us to keep costs down and provide fairly priced tradelines to consumers.

Our tradelines range in price from as low as $150 to around $1500. Our inventory of thousands of tradelines means virtually everyone can find tradelines that fit their needs as well as their budget.

We have also helped contribute to lower pricing in the industry as a whole. Other companies have started to follow our lead and lower their prices to stay competitive.

All of this means that tradelines are now more affordable than ever.

5. Primary Tradelines Are Better Than Authorized User Tradelines

People often assume that primary tradelines are superior to authorized user tradelines. They think that since authorized users are not held financially responsible for a credit account, primary tradelines must be more powerful, but this belief is somewhat misguided.

When it comes to building credit, the ultimate goal is to open your own primary accounts and maintain a positive history on those accounts, so in this sense, primary tradelines are the priority.

However, when it comes to buying tradelines, trying to buy a primary tradeline is generally not a good idea. Firstly, the primary tradeline industry is full of scams and questionable practices, some of which may even be illegal.

If you think about it, it doesn’t really make sense to try to “buy” a credit account that, by definition, is supposed to have been issued to you by the creditor. If the account was not issued to you, that means someone else had to have opened that account in their name at some point, so how does it then become your primary tradeline?

Secondly, purchasing a primary tradeline may not even help achieve your goals as much as you might think. A legitimate primary tradeline will have no age and no payment history associated with it and will probably have a low limit as well.

In contrast, you can legitimately purchase authorized user tradelines that have lots of age and perfect payment history in addition to high credit limits.

Which option do you think would be better for your credit: the brand-new account with a low limit, or a seasoned AU tradeline with a high limit? In general, the seasoned authorized user tradeline is going to be the better choice.

6. Tradelines Are an Alternative to Credit Repair

While tradelines and credit repair are often used together, they are not the same thing, and it’s important to understand the difference.

An easy way to think about the distinction between tradelines and credit repair is that tradelines add positive information to your credit report, while credit repair removes inaccurate information from your credit report.

If your credit report has damaging errors on it that are lowering your score, any tradelines you add will be limited in their power. For this reason, you may want to undergo credit repair before or in tandem with tradelines.

Similarly, tradelines should not be used as a substitute for credit repair. While they can help to balance out derogatory accounts, this is not the same thing as cleaning up errors in your credit report.

The best results for your credit can be obtained by using both credit repair and tradelines together.

7. Authorized User Tradelines Do Not Count for Mortgages or Auto Loans

For the majority of the most common mortgages, there is no minimum tradeline requirement.

We do not advertise our tradelines saying if you buy our tradelines you can then qualify for a mortgage or auto loan. However, we have done some research and we have found that for the majority of the most common mortgages (most conventional, FHA, and VA loans) there is no minimum tradeline requirement in order to qualify for those loans.

In other words, someone can have zero tradelines and could still potentially be qualified to buy a house. The main factors will typically be the debt-to-income ratio, loan-to-value ratio, and credit score.

Fannie Mae typically updates their underwriting guidelines in regards to authorized user tradelines on their website.

We have heard there are similar guidelines for auto loans as well. Again, we are not claiming that buying tradelines can help someone buy houses or cars, but we are simply addressing this common myth.

8. I Can’t Get Tradelines That Were Opened Before My 18th Birthday

Some people believe that you cannot or should not buy tradelines that were opened before you turned 18 years old. The theory seems to be that it would look suspicious if you were to have an authorized user tradeline while under the age of 18, so somehow the tradeline wouldn’t count toward your credit history.

Contrary to this myth, you do not have to buy tradelines that were opened after your 18th birthday.

In reality, there are many examples to show that this is not true. Parents often add their children as authorized users of their credit cards well before age 18, whether they allow their children to actually use the credit cards or they just want to help their children build a credit history from a young age.

Imagine this hypothetical example: let’s say you are 16 years old. Your father has a credit card that has been open for 20 years. He wants you to be able to use the credit card in case of emergencies, so he adds you as an authorized user to his 20-year-old account. In this case, the tradeline actually extends back to before you were born, but that does not prohibit you from being an authorized user on the account.

Of course, there may be exceptions to this rule, since different banks may have different policies as to the minimum age of authorized users.

However, if you are over the age of 18 and buying tradelines, it should not matter how old the tradeline is.

9. Tradelines Are Only a Temporary Solution

Although tradelines usually only report as open for two months, they remain on your credit report as part of your permanent credit history.

While it is true that a tradeline will typically only report as an open account on your credit report for two reporting cycles, this does not mean that tradelines are only a temporary solution.

Once you are removed from the tradeline, the account will then show as closed, and the closed account will remain on your credit report as part of your permanent credit history for as long as the bank continues to report it.

Although closed accounts are assumed to weigh less on your credit score than open accounts, since the closed tradeline is still a part of your credit history, it will likely still factor into your credit score.

10. The Credit Limit Is More Important Than Age

Between the two most important factors to consider when choosing a tradeline, age and credit limit, we usually recommend prioritizing getting as much age as possible, because age is the most powerful factor of a tradeline. Of course, this depends on what your goals are, but in most cases, age is more valuable than the credit limit.

This is because age goes hand-in-hand with payment history, together making up 50% of a credit score. When it comes to the length of your credit history, more is always better.

11. Buying a Tradeline Guarantees a Score Increase

Those looking to improve their credit score sometimes mistakenly assume that they can go out and buy any tradeline and get a guaranteed credit score boost. This is a dangerous myth because if buyers are not educated and choose the wrong tradeline for their specific credit situation, buying a tradeline could actually backfire and hurt their credit.

To make sure you don’t fall into this trap, we recommend reading “How to Choose a Tradeline,” “Common Mistakes Made When Buying Tradelines,” and “The #1 Secret on How to Unlock the Power of Tradelines.”

Read more: tradelinesupply.com

Credit Expert: Can Authorized User Tradelines Build Credit?

June 23, 2019CreditBy toptierfinancial

In 2009 the U.S. Congress passed, and President Obama signed into law, the Credit Card Accountability, Responsibility, and Disclosure Act of 2009. This law, which is more commonly referred to as the CARD Act, restricts credit card issuers from extending credit to consumers who are under 21 years of age, except under limited conditions. The impact of the CARD Act, among other things, has made it harder for young people to build credit reports and establish credit scores.

Some experts suggest getting a co-signer to build credit, but an authorized user account may be a better option.

This is just one example of the difficulties various segments of our population endure when they are trying to build or rebuild their credit reports. Certainly people over 21 who have experienced their own credit disasters have their own unique hurdles with which to deal when trying to build or rebuild their credit reports.

It’s not uncommon for financial experts to advise consumers to look for co-signers, open secured credit cards, or take out credit-builder loans as various strategies to build or rebuild their credit. All of these credit-building strategies have their own respective pros and cons. Some work better than others, some work faster than others, and some are just bad ideas.

The “Authorized User Strategy”

One common method for building credit reports and credit scores is to become an authorized user on a credit card account that belongs to another consumer. The way it works is fairly simple. The primary cardholder adds the new consumer’s personal information to their account and “authorizes” them to use the credit line. The newly added authorized user has the same permissions to use the card as the primary cardholder but has no liability for the debt. Think of it as a credit card but with training wheels.

Most credit card issuers will then report the history of the credit card account to the authorized user’s credit reports at Equifax, Experian, and TransUnion. The addition of the credit card helps to build or rebuild the credit reports of the authorized user.

The Impact of Authorized User Tradelines on Credit Scores

Credit scoring systems, such as those built by FICO and VantageScore Solutions, will consider the newly added credit card account the next time the authorized user’s score/s are calculated. And, if the credit card account has been managed properly, it can certainly help to improve the consumer’s scores almost immediately.

To the extent you are thinking of becoming an authorized user on the credit card of another person, you should first learn a little bit about the card and how it has been managed. You’re going to want to find out the age of the card, and the older it is the better it will be for your credit scores.

You’re going to want to find out the credit limit of the card and also its average monthly balance. This is important because credit scoring models will penalize you if the balance represents too much of the credit limit. This is formally referred to as the card’s “revolving utilization ratio” and it is calculated by dividing the card’s balance by the card’s limit, as they appear on your credit reports. The lower the ratio, the better for your scores.

And finally, it should go without saying that you’re going to want to ensure the card has always been paid on time and there is no record of late payments associated with the account. Late payments, of course, are not good for your credit scores.

In the perfect scenario, you’d like to become an authorized user on a card that is decades old, has a very high credit limit, a low balance, and has always been paid on time. This the optimal account to have on your credit reports and it is a fantastic way to build your credit reports and credit scores.

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.

Read more: tradelinesupply.com

Business Credit Starts With Personal Tradelines

June 21, 2019CreditBy toptierfinancial

Many people dream of starting their own business one day, but not everyone can fund their business ventures with their own savings. Most entrepreneurs will probably want to apply for business credit at some point.

If you are interested in building business credit, our article breaks the difference between business credit and personal credit, what business tradelines are, and how to build business credit.

What Is Business Credit?

Building business credit is similar to building personal credit, but it’s actually a completely separate system. Just as individuals have personal credit scores that are meant to represent their creditworthiness, businesses have business credit scores to represent the company’s creditworthiness.

Why Do You Need Good Business Credit?

Good business credit shows that your business has been reliable in paying creditors, which indicates that it is a good candidate to loan money to or do business with.

Establishing business credit is essential if you ever want to be able to make purchases from vendors on credit or open a business line of credit to help support your company. Virtually all business will likely want the option of using credit at some point.

What Is a Business Credit Score?

Business credit scores, however, are determined by the major business credit bureaus: Dun & Bradstreet, Equifax, and Experian. Each bureau has a different way of collecting information and determining your business credit score. FICO also offers a credit scoring service for small businesses.

Dun & Bradstreet generates a Paydex score, which rates the creditworthiness of businesses on a scale from 1 to 100, 100 being the best score. The D&B Paydex score is entirely based on payment history. Similar to a personal credit score, it helps creditors decide whether to loan money to a business and what the terms of the loan should be.

Interestingly, an on-time payment history does not earn a perfect Paydex score. To get a business credit rating of 100, a business must consistently pay creditors 30 days in advance of the due date. Merely paying on time will only result in a credit score of 80.
In addition, the Paydex business credit score is weighted by dollar amount, so larger accounts could impact your score more than smaller accounts.

Equifax has three different credit scores for businesses.

Business credit reports may include information beyond just credit accounts, such as legal filings and public records.

The business payment index is similar to the Paydex score. It ranges from zero to 100 based on whether payments were made on time.
The business credit risk score is intended to predict the likelihood that a business will become seriously delinquent on payments. Scores can range from 101 to 992.
The business failure score aims to predict the probability of a business closing within 12 months. The score ranges from 1,000 to 1,610 with a lower score indicating that the business seems more likely to fail within 12 months. With both the business credit risk score and the business failure score, a score of 0 corresponds to bankruptcy.

Experian provides a business CreditScore report that includes a credit score for businesses in addition to other relevant information such as public records and account histories. The Intelliscore, Experian’s business credit score, ranges from 0 to 100, but it is different from the D&B Paydex score because it takes into account other factors besides just payment history.
FICO’s Small Business Scoring ServiceSM ranges from 0 to 300 and is used by the Small Business Association in evaluating credit decisions. FICO’s small business credit score may actually include information from the principal borrower’s personal credit report, so your personal credit could have an impact on your small business credit score.

Business credit reports aren’t free, so if you want a business credit check, you will have to pay the bureau providing the business credit report.

How to Build Business Credit

To build up a Paydex credit score, a business needs to obtain a DUNS number from Dun & Bradstreet and establish a payment record with at least four vendors, according to NerdWallet. Since the Paydex score is solely based on how quickly businesses pay their debts, you’ll want to pay your suppliers ahead of schedule to build your Paydex business credit score.

Building business credit is much like building personal credit, although business credit has a different reporting system.

In establishing business credit, as with personal credit, the most important factor is maintaining a good credit history. However, business credit reports can often take into account additional information, such as legal filings, public records, and the age and size of your company.

Things that can hurt your business credit score include:

Slow or late repayment of debt
Missed payments
Judgments, collections, or liens on your business
Outstanding balances/high credit utilization
Not enough years of being in business

Just like personal credit reports, business credit reports can and often do contain errors. it is important to regularly check your business credit report for errors that could be damaging your score.

What Are Business Tradelines?

To get business funding, you will typically need to have solid revenue and strong personal credit, not just business tradelines.

Business tradelines are all of the credit accounts belonging to your business. Examples of business credit tradelines include business lines of credit, business loans, business credit cards, and credit accounts with individual suppliers.

Those hoping to get business credit to start or expand their own businesses may seek out business tradelines for sale to help them build their business credit rating. However, similar to buying primary tradelines, trying to buy tradelines for business credit might not be a good idea for several reasons.

Firstly, business tradelines don’t always report to the credit bureaus. Many business tradelines are not necessarily loans or credit cards, but accounts with individual vendors that allow you a certain period of time to pay your bills. Not all vendors report payment activity, so many times businesses are required to pay Dun & Bradstreet a monthly fee to verify their credit history.

In addition, getting business credit usually depends more on having strong personal credit and a healthy business revenue than having a certain number of business tradelines on file.

How to Get Business Credit

While Tradeline Supply Company, LLC does not assist with tradelines for business credit or business funding, we can share some general information on the subject.

Generally, one of the most important factors in getting business credit is to be a personal guarantor, especially for a newer business that does not have much credit history. As a personal guarantor, it is essential to have excellent personal credit.

Business lenders will likely check your personal credit even if you are not serving as a guarantor.

Even if you are not a personal guarantor, often lenders will still check your personal credit when you are applying for business funding. So while business credit may be the long-term goal, the way to achieve this goal is to first build and maintain your own outstanding credit report.

Therefore, one of the best steps you can take toward establishing business credit is building up your own credit history with high-quality tradelines so you can serve as a personal guarantor for your business. Seasoned authorized user tradelines are a great way to quickly add years of perfect payment history to your credit file. See our updated list of available tradelines now.

Read more: tradelinesupply.com

Tradelines: What You Should Know About Building Credit

May 26, 2019CreditBy toptierfinancial

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.

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. (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 CafeCredit.com.

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 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 TradelineSupply.com.

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

Read more: tradelinesupply.com

The Future of Credit Repair and Tradelines

May 16, 2019CreditBy toptierfinancial

Big changes are happening in the world of credit repair and tradelines.

The tradeline industry is expanding rapidly. Gone are the days of only the wealthy having access to the strategy of credit piggybacking.

Innovations by tradeline companies have made tradelines more accessible than ever, helping to promote equal credit opportunity.

The top credit repair companies are getting on board with authorized user tradelines as a way to take their clients—and their businesses—to the next level of success.

Keep reading to find out why the future of credit repair depends on tradelines.

Tradelines & Credit Repair Go Hand-in-Hand

Credit repair and tradelines work best together. Click to go to the full version of our infographic.

As we discussed in “Credit Repair vs. Tradelines,” when it comes to establishing or re-establishing credit, credit repair can only go so far.

It can remove inaccurate information, but then what is the client left with? They may end up with a thin file or they may have accurate negative information that cannot be removed.

The client still needs to show that they have a credit history. Removing too much information from their credit file could backfire and hurt their credit more than it helps.

The client not only needs credit repair but also credit restoration and reestablishment.

Credit repair is only half of the equation. The other half of the equation is tradelines, which can add positive credit history to a client’s credit file to reestablish their credit.

Unfortunately, the credit repair industry has not yet fully come around to the idea of using tradelines as an integral part of their business model.

This is changing rapidly, however, as credit repair businesses are realizing why authorized user tradelines are so valuable and how easy they are to add to their credit repair services.

How Credit Repair Companies Can Benefit from Tradelines

Although many credit repair businesses have historically been resistant to using tradelines, they would do well to reevaluate this stance. Tradelines can allow credit repair businesses to expand their offerings and grow at a much faster pace.

Here are some of the benefits credit repair companies can reap from integrating tradelines into their business:

Tradelines can enhance clients’ results and increase customer satisfaction.
Tradelines provide an opportunity to upsell and add value to your services.
It is easy to integrate tradelines into a credit repair business model.
Selling tradelines can increase your monthly revenue by thousands of dollars.

Why Don’t More Credit Repair Companies Offer Tradelines?

The legitimacy of tradelines has been confirmed by the U.S. Congress.

One common concern we hear from credit repair companies is the question of whether tradelines are legal. While we understand why this is such a common question, we want to clear up the misconceptions people have about the legality of tradelines.

Tradeline Supply Company, LLC does not give legal advice, but we can look to the government organizations that have provided guidance on this issue.

In 2008, the issue of piggybacking using AU tradelines was discussed in Congress after FICO tried unsuccessfully to eliminate the ability for AU tradelines to be factored into FICO scores.

Because of the Equal Credit Opportunity Act of 1974, which prohibits credit discrimination, FICO was forced to admit that they could not exclude certain AUs from their credit scoring models. The fact that this congressional hearing protected the status of AU tradelines supports the idea that tradelines are legal.

Understandably, however, the tradeline industry has earned a reputation for not being the most trustworthy business. Unfortunately, there are illegal and unethical tactics that take place within the tradeline industry that consumers should watch out for.

Tradeline Supply Company, LLC is changing the tradeline industry for the better by fighting unethical and illegal practices.

There are plenty of companies out there that sell tradelines while also participating in questionable and potentially fraudulent activities, such as address merging, selling primary tradelines, and using CPNs.

It’s important to work with a tradeline company that operates ethically and is fully compliant with laws and regulations. With our high standard of integrity, Tradeline Supply Company, LLC stands out from the tradeline companies that engage in unethical practices, and we aim to change the entire tradeline industry for the better.

Conclusions on the Future of Tradelines and Credit Repair

Tradeline companies who operate with ethics and integrity are breaking down the stigma of tradelines and showing how they help to create equal credit opportunity.

As a result, authorized user tradelines are no longer an underground strategy accessible only by the privileged few. Anyone can now use tradelines to build credit. The consumers who stand to benefit most from tradelines include those seeking credit repair.

While credit repair helps to remove damaging inaccuracies from consumers’ credit reports, removing negative information is often not enough to get people to where they want to be. Tradelines represent an opportunity to add positive credit history, helping to restore and rebuild consumers’ credit.

Despite this fact, some credit repair companies still do not offer tradelines to their customers because they feel that tradelines are a threat to their business. They see tradeline companies as competition because clients may end up spending money on tradelines as opposed to their credit repair services.

However, this outdated view of the tradeline industry is preventing credit repair professionals from better serving their customers and ultimately stunting the growth of their businesses.

Credit repair companies who are adapting, innovating, and poised to thrive in changing times understand that they can no longer ignore the value of tradelines.

Tradelines allow credit repair businesses to offer more services, get better results for their clients, and multiply their profits. Simply put, credit repair companies cannot afford to miss out on tradelines if they want to keep up with the times.

Credit repair works best when paired with tradelines. In the future of credit repair and tradelines, the best credit repair companies will thrive by using tradelines to complement their credit repair services and maximize results for their clients.

Read more: tradelinesupply.com

The Surprising History of the Credit Bureaus

Do Federal Laws Really Help Me Establish Credit?

What Happens to Your Credit When You Get Married or Divorced?

Don’t I Have the Right to a Credit Report?

How Are Authorized User Tradelines Considered by Credit Scoring Systems?

Watch Out for These Tradeline Myths

Credit Expert: Can Authorized User Tradelines Build Credit?

Business Credit Starts With Personal Tradelines

Tradelines: What You Should Know About Building Credit

The Future of Credit Repair and Tradelines

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