To achieve your goal of receiving a higher credit score, you should seriously consider adding trade lines to your credit report.
A Closer Look at Trade Lines
A trade line is a credit account found in your credit report. It can take the form of a credit card, a personal loan, and even an account with a utility service provider. The issuers of your trade lines are expected to submit reports of your credit and payment activities to the three credit reporting agencies. This is how your credit report is built. These companies will report your good, on time payments and your bad, late payments.
So if you pay on time. you will see a series of “C” for current next to each trade line. At a glance, your potential creditors can see if you have good credit habits. If they see a number (like a 1 – that tells them that you paid 1 month late, a 2- means 2 months late and so on.
Things To Remember:
- There are plenty of trade lines you can apply for. You can opt to get a mortgage, car or personal loan, a prepaid, secured or unsecured credit card, and other credit deals. If you are trying to build up your credit, make sure that your potential creditors report to the credit bureaus. Not all companies do. Especially small car lots offering buy here, pay here. Most do not report UNLESS there is a problem and then they will report you late.
- Keep track of your payments. This comes in handy when trying to prove that you paid a bill on time. In fact, you can use them as references when disputing erroneous items and outdated accounts in your credit files. So, make it a habit to keep them with your other important financial documents. That way, you can simply take them out when a sudden need arises. Now with services like dropbox.com, its easy to scan a reciept in and upload it. That way you reduce your clutter and still keep all your documentation in an easy to find place.
- Taking out a trade line is just one part of the equation. It is also important that you manage your existing credit accounts in the best way you can. After all, this can be instrumental for you to attain your target credit rating. To do this, you can simply settle your dues completely and prudently. You should also remind yourself to spend within your credit limit. Finally, you should set a limit to the number of credit accounts you will apply for and manage.
- Should you close old accounts? Most of the time I will say no. These old accounts can add to your credit score. BUT if you are not using them, most creditors will close them if there is no activity for a year. For my old credit cards that I don’t use that much, I use them at Christmas time and pay them off in January. That way I keep them open and take advantage of having an aged credit line on my credit report.
Why Maintain a Good Credit Standing
Banks give the best rates to people with good credit. If you are a chronic late payer, then you can expect to pay a higher interest rate than your good credit counterpart. Make it your priority to pay all bills on time. Don’t max out your credit cards. That will also bring our credit score down. Try not to utilize more than 40% of your revolving credit for a chance at the best rates.
It is also good to note that a good credit history can be an effective tool for negotiating for low interest rates, flexible payment terms, and less fees and charges. So, you should never disregard the power that it could provide credit applicants, like you.
Examples of tradelines:
* Installment loans
Car loans are a good example of an installment loan. Most car lots have ties with big finance companies to help their clients get approved for a car loan. If you have credit problems, a few of the sub prime lenders DO NOT REPORT TO THE CREDIT BUREAUS. If this is the case, you can ask them to do so for you. Some will, some will charge a monthly fee to do so.
Retail Cards – In-store accounts for items like refrigerators, washer/dryers, and jewelry that are being paid for on an installment plan should also be included on your credit report if you are making your payments according to schedule. Many of these smaller stores only report to the credit bureaus if an account is placed in collections, ask them to send in a report of your payment history to add a positive tradeline to your credit report. Make sure the creditor notifies all three credit bureaus.
Again, a current mortgage would likely be listed already, but if this is not your first mortgage, and you have other successful mortgages in your financial past, make sure they are listed. This all still weighs in your favor. If you have paid your mortgage on time with an individual who holds the lien to your home, you should get credit on your credit report for it. Most individuals would be fairly baffled at your request to add a manual tradeline to your credit report, simply write the three credit bureaus and ask that they account be added and give your point of contact’s name and phone number for verification. The bureaus will verify the information and have it added to your credit report. Repeat this process a few times a year to keep your information current.
* Secured Loans/Secured Credit Cards
These are types of tradelines that you have secured by putting up something as collateral, such as your vehicle or home. You can obtain a secured credit card by depositing a pre-determined amount of money in an account with the individual company. You can then use that credit card to charge up to that amount and your deposit guarantees the company of being repaid, even if you miss a payment. Secured accounts are a viable way to rebuild credit after a bankruptcy, as long as you pay on time.
* Utility Accounts
Do you pay your monthly utilities in full and on time? Then try to add them to your credit report. Utilities usually only find their way onto your report if you’re behind in your payments. Paying these items faithfully each month should boost your credit record, but if your local utility companies don’t actively report in to the credit bureaus via a tape system the firm may decline your request to add your history to your credit report. Most will comply and the benefit of having a positive tradeline on your credit report makes it well worth the try.
While there is really no substitute for paying your debts on time each month, it’s good to know that there are ways to improve your credit report. The key is knowing what’s in your report, and making sure it’s kept accurate.
ABOUT THE AUTHOR
This article was written by the writing team of NewHorizon.Org. The company is continuously giving out information to people who are ready to repair their credit and improve their credit score. Also NewHorizon.org team strives to empower the homebased and small business owners by bringing information that can help them to manage and grow their businesses. Let our 14+ years of business finance experience help you to get the financing you need! Contact us if need financing for your business.