If you’ve been trying to purchase a home or a new car, you may have hit a few speed bumps with your credit score. Your lender may be unwilling to loan you the money needed because your credit score is a bit too low. That low credit score is an indication that you’re at high risk for defaulting on the loan, and lenders typically don’t want to take that risk. The good news is there is hope! Utilizing an authorized user tradeline, your credit score can get the boost it needs. It’s important you understand a few things about credit scores and an AU tradeline first.
Why Does Someone Need a High Credit Score?
If you want to open a line of credit, the creditor is going to look at your credit score. This is a history of all your credit accounts, whether you paid them off and whether the payments were made on time. With all of that information, you are given a score. The higher the score, the better your history and the more likely a creditor is to offer you a line of credit.
Without a credit score, a lender can’t determine how trustworthy you are in paying back a loan, which makes lending you money more of a risk. Some other individuals and entities that may look for a high credit score include future landlords, utility providers and insurance companies.
What Is a Credit Score Comprised Of?
You already know your credit score shows your credit history, but what exactly goes into that? The following breaks it down generally.
- Your Payment History – This comprises 35% of your score, making it the most important element. If you are late on even one payment, it can dramatically decrease your score.
- Your Utilization Ratio – This comprises 30% of your score. It presents as the ratio between your total revolving debt and the revolving credit you have available to you. You want this percentage to be low.
- Your Credit History Duration – This comprises 15% of your score. The items taken into consideration for the duration of your credit history include how old your accounts are, and how many seasoned accounts you have versus non-seasoned accounts. Seasoned accounts are a good thing and will improve your score.
- Your Credit Variety – This comprises 10% of your score, and basically shows that you have experience with various types of credit.
- Your New Credits – This comprises 10% of the score as well. If you have too many new credit inquiries, it will hurt your score.
What Can Destroy a Credit Score?
You want to have a high credit score so you don’t forfeit your opportunities to obtain loans for a home, a car or other purchases that require the use of credit. To keep your credit score high, you should understand what could hurt it. The following are a handful of things you should avoid.
- Missing payments. One missed payment could remain for seven years on your report. A 30-day-late payment could cost you somewhere between 90 and 110 points, which could quickly and dramatically make a great score become not-so-great.
- Canceling a credit account. When you close a credit card account, your score could go down. This is because it decreases your utilization ratio and shortens the duration of that particular credit account.
- Foreclosing your home. Sometimes it can’t be avoided, but a foreclosure could cost you up to 160 points. This drop in score could remain for up to seven years.
- Claiming bankruptcy. A bankruptcy will make the biggest dent in your credit score, with up to 240 points possibly taken off. This could also remain for up to 10 years on your report.
- Maxing out your credit cards. Utilization is a high percentage of your credit score, so you should be careful about it. You want to keep your credit card balances low, because if you start to max them out, you could lose up to 45 points each.
- Settling a debt. Some creditors will settle your debts for less than what you owe, but it’s going to cost you some credit score points, possibly up to 100 or more.
What Can Improve a Credit Score?
If your credit score has been damaged, there are two things you’ll need to do. First, look into purchasing an AU tradeline. This is a process in which you become an authorized user on an account that has a great credit history. In just a few days’ time, your score could begin to improve by sometimes hundreds of points depending on the tradeline you purchase.
Second, utilize some credit score repair techniques. While an AU tradeline will improve your score, you’ll still need to work on repairing any mistakes that were made. Those mistakes are going to keep your score at a low roar, but if you can get them removed, the tradeline will function better as it increases your score.