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When you are looking to improve bad credit, credit repair companies are one option, but building good credit on your own is just as easy.
Tradelines and the information they send to a credit reporting agency make up your credit score. The better the tradelines appearing on your credit report are, the better your chances of achieving good credit.
But are buying tradelines the way to go or are there better options for adding good tradelines to your credit reports?
What Is a Tradeline and How Does It Work?
A tradeline is any account that appears on your credit reports. These can be credit tradelines such as credit cards and loans or other types of tradelines like rental payment history and utilities.
Every single tradeline that appears on your credit reports, including the closed ones, will impact your credit.
Each tradeline has essential facts about the status of your account which include balance, payment history, the account opening and closing date, and more. These facts are used to calculate your credit score.
Your credit score is made up of five key facets:
- Payment history – 35%
- Amounts owed – 30%
- Length of credit history – 15%
- Mix of credit – 10%
- New credit – 10%
So every tradeline with a payment history will influence the payment history portion of your credit score. And open accounts that report a balance (including a balance of $0) will be included in the amounts owed portion of your score.
Everything from subtle account differences month to month (i.e., increases in balance reported) to adding or removing tradelines, will impact your credit score.
How Much Will a Tradeline Boost My Credit?
Adding a new tradeline to your credit reports can raise your credit score by as little as 5 points or up to 100+ points. It all depends on the type of credit line and the time it spends on your credit reports.
A new rental tradeline, for instance, can come with up to two years’ worth of payment history. This will quickly raise your credit score, likely by a significant amount.
Opening a new revolving tradeline, like a credit card, will immediately have a positive impact on your credit utilization. Credit utilization is determined by totaling up all of the balances on your revolving accounts and comparing them to the total credit limits on your revolving accounts.
So, the credit limit on the new account could help your overall utilization rate, especially if the credit limit on the card is high. But this only works if you keep the utilization on the new card low.
This will initially give your credit score a boost. Then, after several months of on-time payments, your credit score could see another increase from the positive payment history.
Adding an installment tradeline may immediately impact your mix of credit. Still, the most significant credit score increase will come after maintaining the account for 1 year or more. For instance, opening a credit builder loan can increase your score by 70 points within 12 months.
How Can I Buy or Rent a Tradeline to Build Credit?
Several companies on the market offer to help you improve your credit score quickly through renting or buying tradelines.
The tradelines these companies are selling you are actually authorized user slots on someone else’s credit card. This can allow you to quickly add years’ worth of payment history to your credit in a short time frame.
And other aspects of the account can have a beneficial impact on your credit score calculation, such as credit limit and the age of the account.
That said, buying tradelines is risky and not usually worth it when there are many better and more long-term options for improving credit.
How Much Do Tradelines Cost?
The cost of buying or renting an authorized user tradeline varies from company to company and even from tradeline to tradeline. But, generally speaking, prices start in the $200s.
However, the lower-priced tradelines often come with a short history and a small credit limit.
For seasoned tradelines (those with a long history and a high credit limit), the price can easily exceed $1000!
To get the most improvement to your credit score as possible, many of these tradeline selling companies recommend you buy multiple tradelines. As many as four or more — this can add up to thousands of dollars very quickly.
Using Tradelines to Build Business Credit
While purchasing a tradeline is most often done for personal credit (consumer credit), the practice is also done for business tradelines.
When it comes to business credit, there are a whole different series of credit scoring models and business credit bureaus. And there are a lot fewer laws regarding what can and cannot appear on a business credit report.
Suppose you have some negative information appearing on your business credit reports. In that case, it can be tough to improve your business credit score. Some people then resort to using credit repair services that offer to sell you tradelines.
This can be done in much the same way as renting consumer tradelines, where you pay a flat fee for an authorized user slot on someone else’s business credit card, giving you a new business tradeline on your credit.
But the more common practice in buying tradelines for business credit is the purchase of a shelf corporation.
A shelf corporation is one where a company creates a corporation and opens a bunch of credit accounts under the corporation’s name with the express purpose of selling that corporation to a small business that is struggling to get credit on its own.
The idea here is that this business owner will suddenly have access to all of the shelf corporation’s credit lines and credit history. But it often does not work out well and is considered “shady”.
Is It Legal to Buy Tradelines?
There are no laws currently in the U.S. that forbid the practice of buying authorized user tradelines (or selling them). But that does not mean that there won’t be new laws governing it in the future.
Even though it is not technically illegal to sell tradelines, this piggybacking credit practice often violates a credit card company’s terms of service.
To the credit card company, selling someone a spot as an authorized user on your credit card is fraud. And the punishment could include the closure of your account.
The credit bureaus and credit scoring agencies also consider it an unfair practice. So much so that FICO has started cracking down and removing these authorized user accounts from credit score calculations.
When it comes to business credit, buying a shelf corporation is legal. But creditors/lenders may be wary if they believe you’re strictly using the shelf corporation for credit purposes. They could close all of the accounts associated with the corporation.
What Tradelines Are Legitimate?
Most tradelines that you can add to your credit reports are legitimate. It is just the practice of buying authorized user tradelines that is potential fraud.
Instead of buying authorized user slots on someone else’s credit card, a better practice is buying primary tradelines.
Primary tradelines are any accounts where you are listed as the primary account holder. This includes a credit card opened in your name (primary cardholder), a loan you apply for, or even a utility bill.
It is also worth noting that jointly held or co-signed accounts also count as primary accounts.
Buying primary tradelines is a bit different from buying authorized user tradelines. Instead of paying a company for access to someone else’s account, you are directly paying a lender or third-party service that adds the information to your report.
One example of buying a tradeline would be rent reporting services. For a small fee, rent reporting companies will add your rental payment history as a rental payment tradeline on your credit reports.
This is 100% legal but is not a service usually offered by your landlord because they often do not want to take on the cost.
Other tradelines that you can purchase include secured credit cards, utility reporting, credit building loans, and debit cards that report as credit.
Below is a list of Digital Honey’s four favorite tradelines that you can purchase.
CreditStrong offers a series of credit builder loans for personal and business credit. They can help you build credit and your savings.
There is no credit check involved with the loan. This is because the loan is secured with the loan funds themselves. So when you are approved, the actual loan value is locked away in a savings account.
As you make payments each month, CreditStrong then reports those payments to the main credit bureaus which then improves your credit score.
BoomPay and the BoomReport service that they offer is a subscription-based rental reporting service.
For $2 a month, Boom will report your ongoing rental payments to all three credit bureaus. You can also have them report two years’ worth of rental history for a one-time fee of $25.
This rental tradeline can be for any of your previous rental payment accounts. Although it should be noted that if you incurred any late payments during your rental history, these will be added to your credit reports as well.
Keep in mind that they only consider a payment “late” if it was made 30 days late or more. If your payments were made before that, they are still considered on-time for credit reasons.
StellarFi is similar to Grow Credit in that it helps you build credit by paying your bills.
However, it’s much more robust than Grow Credit because it lets you pay all your bills and reports to all three major credit bureaus.
Everything from rent to your phone bill to gym class is reported so you can build credit on the bills you pay anyway.
And here’s the kicker. StellarFi gives you up to a $25,000 bill limit on their Prime plan, which is drastically higher than Grow Credit’s max of $1,800.
All for a very reasonable price of just $9.99 a month.
Note that a cheaper Lite plan is available for $4.99 a month, but it only offers a $500 credit limit.
There’s also no credit check, no interest, and no deposits. StellarFi will even optimize your credit account to help you achieve an ideal credit-to-debt ratio.
So if you’re looking for a straightforward way to build your credit with simple, affordable pricing, StellarFi is it.
Extra Debit Card
Extra offers a debit card that reports to the credit bureaus like a credit card does.
The Extra card requires no credit check, as it is tied directly to your checking account. Every time you swipe your card, Extra covers the purchase price. They then automatically deduct the funds from your checking account by the next business day.
They report these automatic account repayments as payment history at the end of each month.
There are no interest charges associated with this revolving tradeline; instead, you’ll need to pay an annual subscription fee of $149.
Tradelines and their history are the key to good credit. But buying tradelines, especially authorized user tradelines, is not the best way out of a bad credit situation.
Investing in other types of tradelines is better for long-term credit repair. The same goes for personal credit or business credit.
And adding new tradelines isn’t the only way to achieve a good credit score. You can also work on improving your existing credit utilization and paying off collections.
So it’s important to be mindful of the types of tradelines you sign up for and whether or not they can truly be of value to your credit score.
Read the other articles in our tradeline series:
- How Much Will a Tradeline Boost My Credit?
- How Long Do Tradelines Stay On Your Credit?
- Authorized User Tradelines
- How to Get a Free Tradeline
- Types of Tradelines
- Buy Credit Tradelines
- Rental Tradelines
Amanda Garland is a personal finance blogger living in Dallas, TX. 10 years ago she was living paycheck to paycheck and knew nothing about how credit works. She learned some hard lessons in her fight for financial stability. Now she has a friendly competition going with her husband to see who can reach a credit score of 850 first. She is also a poet, having obtained a Bachelor of Fine Arts degree in Creative Writing.