No financial investment or decision should be made without a fair bit of consideration on your part first. If you are thinking of becoming an authorized user of a tradeline as a way of boosting your credit score, then you need to answer some questions first so that the process works in your favor and your investment is worth it.
There are many questions you need to consider when thinking about adding tradelines to your account. However, the five questions below are a good starting point as you consider tradelines and may lead to you do more research and ask more questions.
1. What Are Tradelines?
A tradeline is a credit account opened in your name and is listed on your credit report. This can be a credit card, auto loan, home loan or student loan. Your credit report looks at how long your various tradelines have been open and whether the payments have been made on time.
An authorized tradeline is when you add someone else’s tradelines to your account so you can take advantage of their good credit standing and payment history. This can help to improve your credit score. As an authorized user, you are not responsible for any charges to that tradeline and you cannot add to the tradeline like you can one of your own credit cards, but you do get to reap the benefits.
2. Is Age More Important Than Limit?
People often wonder if the age of the account or the credit limit is more important when it comes to tradelines. The importance of each are dependent on your investment and financial goals.
For example, the age of a tradeline equals 50% of your credit score when combined with the credit history. As such, you want tradelines that are old enough to have a large impact on your credit because the seasoned tradelines can provide you with a longer period of good credit standing that can influence your overall credit report. Therefore, age is a highly critical factor you should consider when choosing a tradeline. However, that does not mean that age is always more important.
In fact, the credit limit should also be considered because it can affect your utilization ratio. However, your goal may be to have higher limit accounts in your report, which means you should not ignore the credit limit of available tradelines.
3. Does Your Utilization Ratio Affect Your Credit and Tradelines?
Around 30% of your credit score is dependent on your utilization ratio, which makes utilization an important factor of your credit and not something you should ignore. Your utilization is the ratio of your outstanding debt and your overall credit limit. A high utilization ratio or several independent ratios can actually work against you and decrease your score. Tradelines do not fix a high utilization ratio but your tradeline can be less efficient if you have a high ratio to begin with.
4. Which Tradeline Is Right For You?
That depends on your goals. If you want to improve your credit score or are interested in improving your utilization ratio, then you may want to consider tradelines that have higher limits. On the other hand, if you are more interested in the age of your accounts you may decide to choose older tradelines. The choice is up to you and your financial investment goals, which is why this is something you should consider from the beginning as you look into tradelines.
5. Are Tradelines Enough?
Are tradelines going to be enough to help your credit score, or is there more you also need to do? For example, some people expect tradelines to help them magically transform their score into perfect credit. However, there are some instances where you may also need other forms of credit management, such as a credit repair.
Tradelines can help your credit at any time, but if you have negative information on your report the tradeline won’t fix your score. Therefore, credit repair can be used in conjunction with tradelines to help remove the bad information and allow the positive aspects of a tradeline to help boost your score.
Ask Your Questions Before Becoming an Authorized User
Asking questions before you become an authorized user can help you understand how this financial investment works and how it can benefit you. For more help understanding tradelines or if you’re ready to add tradelines to your credit, contact Coast Tradelines today for expert guidance.