Buying tradelines (or renting tradelines) is often promoted as a way to quickly boost credit scores. But is it legit?
Whether you’re a business owner searching for a small business loan, or if you’re hoping to get a mortgage or car loan, you likely know that good credit is key to getting approved for financing, and for getting the best interest rates.
If you’re having trouble qualifying for financing and searching for credit repair solutions, you may have come across ads for tradelines for sale. Here we’ll help you understand whether buying tradelines is a good option for you or your business.
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Buying tradelines is an arrangement where someone pays to be added to someone else’s account (usually a credit card account) as an authorized user.
In a typical authorized user scenario, a cardholder adds someone to their credit card as an authorized user so that person can use the card. For example, a parent might add their teenager to their credit card so they can use the account while building credit. The primary account holder is legally responsible for charges made by an authorized user.
When someone is added as an authorized user on a credit card, the account then typically appears on the authorized user’s credit reports. If the account is paid on time and balances are low that often helps boost their credit. This is sometimes referred to as “piggybacking,” because it allows that person to piggyback on someone else’s good credit.
While most people are added as authorized users to friends or family member’s accounts, not everyone knows someone who is willing and able to help in this way.
That’s where buying tradelines comes in. (This arrangement is also sometimes called “tradeline rental,” but buying or renting tradelines generally refers to the same process.)
Instead of someone you know adding you to their account as an authorized user, you pay a tradeline rental company to find someone who will add you to their account, for a fee. Tradeline rental firms match people who have credit cards in good standing and want to make money by “renting” them out, and people who are willing to pay to be added to someone else’s account. These firms collect payments and monitor the process.
Check Your Business Credit To See What Loans You May Qualify For
After you create a Nav account and connect your business data, you can see if the business credit bureaus have your business on file. Checking won’t hurt your credit scores.
Pros of Buying Tradelines
Here are the main benefits of buying tradelines:
Buying tradelines can lead to a quick boost in your credit scores.
Once you’ve been added to someone’s credit card, the entire payment history of that account will likely appear on your credit reports. If the account you’ve been added to has a long, positive payment history, you may see a quick and substantial boost to your credit scores.
It is not guaranteed though. Some credit scoring models give less weight to these types of accounts. And more generally, how much adding an account will help your credit depends on a lot of different factors including what information is already included in your credit reports, as well as the details of the new credit tradeline.
Builds Credit History
It can help build a positive credit history, especially for those who have a thin credit file.
If you don’t have enough accounts appearing on your credit reports to calculate a credit score, your credit profile will fall into the category known as “thin file.” The types of tradelines that can help you build credit may include credit card accounts, auto loans, student loans, a mortgage etc.
Adding a new tradeline to your credit reports—especially a credit card one with an established payment history and low balances—may provide a strong credit reference to help move your credit score out of the thin file category.
Access to Higher Credit Limits
Having a tradeline with a high credit limit and a low balance can improve your credit utilization ratio, a key factor in credit scoring.
In addition to payment history, low debt utilization is another factor that can contribute to good credit scores. This factor compares the balance reported on a credit report for a credit card or line of credit to the credit limit for that account.
The formula for utilization is: balance divided by credit limit x 100.
Generally, consumers with the best FICO score have utilization of less than 10—20%. Whether it’s your own credit card, or one on which you are an authorized user, low utilization can be helpful to building and keeping good credit.
Cons of Buying Tradelines
So far, there appear to be a lot of benefits to buying tradelines. What about drawbacks? Here are a few.
Purchasing tradelines can be expensive, with prices varying widely based on the age and credit limit of the tradeline.
The cost of tradelines can range from several hundred dollars to several thousand dollars. Pricing may vary depending on how long the account has been opened and the size of the credit limit, as well as how many you purchase.
Ethical and Legal Concerns
While buying tradelines is not explicitly illegal, it is a gray area and is generally frowned upon by lenders and credit bureaus.
Credit reporting agencies and companies that create credit scores aren’t a fan of tradeline rentals because these types of credit references don’t really reflect the experience of the consumer with the account. (The person renting the tradeline won’t be using the account or making payments.)
However, they generally can’t stop it either. It does not appear to be illegal to buy tradelines per se, though at least one of the major credit bureaus suggests that using this method to improve your credit may illegally misrepresent your creditworthiness and even lead to bank fraud when you apply for credit.
The benefits from purchased tradelines may be short-lived.
Often these arrangements last for a few months. After that time period, the authorized user will be removed from the account. The account itself is likely to remain on your credit reports and that may continue to benefit your credit history. But it is possible for these tradelines to disappear from your credit for various reasons. However, if you have applied for other credit in the meantime, you will be working on building your credit history in more direct ways.
Risk of Scams
There’s a risk of encountering fraudulent companies when buying tradelines.
You need to provide personal, sensitive information such as your Social Security number when you purchase tradelines. There is always the risk that your information could be used for fraudulent purposes, including identity theft.
Building your own tradelines involves demonstrating positive credit behavior over time. Here’s what you need to know:
Pros of Building Tradelines Yourself
You have complete control over your credit behavior and, consequently, your credit score.
When you get credit on your own, you can remain completely in control of how you use the account. You don’t have to worry about how the stranger who owns the account manages it, and you don’t have to worry about whether your approach is legal. It puts you in greater control of your own credit future.
One way to build tradelines yourself is with a secured credit card. Some credit card companies offer personal secured cards and a few offer secured business credit cards. You’ll need to put up a security deposit to get the card, but unlike tradeline rentals, you’ll get that money back if you manage the account properly.
Another way to build tradelines is with a credit builder account. Here you make payments toward a savings account, and eventually you get the money you’ve saved (minus any fees or interest paid).
Finally, net-30 vendor accounts can be an excellent way to establish business credit. These types of accounts may carry an annual fee, but it’s usually less than the cost of buying a tradeline.
Find net-30 business tradelines that report to business credit reports here.
Good credit habits have a long-term positive impact on your credit score.
The best way to build credit is to get credit with accounts that report to credit reporting agencies, pay on time, and keep balances low. That’s not always feasible; financial emergencies can come up that make it difficult to manage your accounts well. But if you can follow both those principals you’ll likely see significant progress toward better credit.
No Additional Cost
You may pay interest and/or an annual fee, but there’s no additional cost to building your own tradelines.
You’ll usually save money by building credit yourself, versus paying a broker to buy tradelines. Again, some accounts may have annual fees, and you may pay interest on a credit card if you can’t pay the balance in full each month, but that cost is usually less than the cost of renting trade lines.
Cons of Building Tradelines Yourself
Building good credit takes time.
The age of the information on your credit report is one factor that affects your credit scores. Older accounts you’ve held for a long time are more helpful than brand new ones. (Older accounts are sometimes referred to as “seasoned tradelines.”)
Limited by Your Credit
If you have bad credit, or a thin file, it might be difficult to get approved for new credit products to build your tradelines.
And that may lead you to believe authorized user tradelines are your only option. But it may not be.
First, consider whether your family members or a close friend may be willing to help you by adding you as an authorized user to their account. If so, make sure it’s an account that has always been paid on time and doesn’t have a high utilization rate. That can be an awkward conversation, but you want to boost your credit scores, not hurt them.
Don’t be offended if they say no; after all, the primary cardholder is ultimately responsible for any charges authorized users make.
Other options we’ve mentioned earlier, such as credit builder loans or secured cards generally don’t require strong personal credit scores. They can be a place to start.
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While buying tradelines may provide a quick boost to your credit scores, it also comes with risks and potential downsides. There’s no guarantee that paying for tradelines will improve your credit scores, and it will likely be more expensive than doing it yourself.
Building your own tradelines is a safer, albeit slower, way to improve your credit. If you can afford to take time, it may be your best bet in the long run.
This article was originally written on June 21, 2023.
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