Get The Credit Score Boost You Need With Authorized User Trade Lines
Authorized user tradelines can give your credit score a real boost just when you need it. But if your score is really low because of numerous delinquencies, don’t expect to go from bad to great credit overnight. These things take time. To get your score where you want it, first pay down your debt if you have any, and make sure you pay all of your payments on time moving forward.
What Is An Authorized User?
Someone who is an authorized user on a credit card account is allowed to use that credit card the same as the primary account holder. This means that an authorized user can make purchases and make payments just as the person who opened the account does. (Providing the primary account holder gives the authorized user the card)
Because the responsibility is shared with the primary account holder, any information regarding the account is also linked to them. When an authorized user is added to an account, both their credit report and score are impacted by the account, regardless of when they were added.
What Is A Tradeline?
In the financial world, the term tradeline is just industry jargon for a credit account. You may have also heard the phrase “seasoned trade line,” which simply means that the credit account is older than two years and has an established credit history.
What Are Authorized User Tradelines?
Authorized User (AU) Trade lines, referred to as Piggybacking are revolving accounts which are added to primary trade lines. The purpose of this usually involves a user in need of a CREDIT SCORE BOOST to get a loan that they didn’t qualify before such as a car loan or a mortgage. This account will then appear on your credit report showing your authorized user status.
Authorized user trade lines also refers to the process of a credit history being shared with an authorized user. The entire account history is shared. Even if the authorized user isn’t added until 2020, but the account was opened in 2010. The authorized user will get every bit of history that goes with the account — all ten years of it.
Does Making Someone An Authorized User Help Their Credit?
Yes, it can help a person’s credit score improve. It usually takes about 60 days before any changes can be seen on the credit report. Once a tradeline is on the credit report, then the credit score will adjust accordingly.
Just know that if you have serious credit issues like receiving calls from debt collection agencies, dealing with substantial medical debt, or missing a lot of credit card payments, you won’t see that much of an improvement. You’ll see your score improve somewhat, but it won’t increase by leaps and bounds.
What Is A Primary Tradeline?
A primary trade line is an account on a credit report that is opened in your own name and is designated only for the primary account holder. A primary tradeline includes all lines of credit such as mortgages, credit cards, car loans, or anything else that is being borrowed under the primary account holder. The primary account holder will be responsible for paying the balance on the accounts and it would be reflected in their credit score depending on how well they can manage their debt. Primary trade lines are used when users want to first establish a credit score and begin to build a payment history on their own. Most of these primary trade line are easy to open such as credit cards through banks or starter cards for people with no credit at all.
What Is A Seasoned Trade Line?
The word “seasoned” refers to time. A seasoned tradeline has been open for a certain period of time. Each financial institution that extends credit will define how much seasoning they are looking for but, in general, any account under two years would not be considered seasoned. In other words, two years is the minimum amount of time that would possibly qualify a trade line to be considered seasoned. In short, when it comes to your credit, the more seasoned the better.
Authorized User Tradelines
vs
Primary Tradelines
In an authorized user position, the account will appear on your credit report, but you, as the authorized user do not have any financial responsibility for that account. Therefore, many people think that primary accounts are better than authorized user tradelines.
A primary tradeline is an account that an individual has in their name where the creditor has extended some form of credit to that person specifically. They are financially responsible for that account and this is reflected on that person’s credit report. The overarching goal of someone trying to build their credit should be to open their own primary accounts and keep those accounts in good standing forever. In this way, primary accounts are the best.
What’s The Difference Between A Primary And Authorized User Tradeline?
The main difference between Primary and Authorized User Tradelines would be who is responsible for paying the balance on the accounts they are assigned to. If you have a Primary Tradeline on your credit report, whether it be a car loan or mortgage, you are responsible for paying the balance. On the other hand, if you have an Authorized User Tradeline, as a user, the only thing you will inherit from that credit line would be the payment history, besides that you are not responsible for any payments.
Another difference would be the purpose of each of the tradeline and how they affect someone’s credit score. If a user has no history of payments in their current credit report, it would be more beneficial to have a primary tradeline, this way the user can establish a history and continue to benefit as the user utilizes the tradelines and makes on-time payments. If the user has already established a payment history but needs a boost, instead of opening more primary tradelines which can negatively affect their score, it is recommended to purchase Authorized User Tradelines. This way the user will be able to inherit the credit score and boost their overall score without adding an inquiry or establishing “new” credit which will reduce the overall average age of their accounts.
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What Kind Of Accounts Should Be Considered If You Want To Become An Authorized User?
Accounts that have been open for a number of years and are in good standing (on time payments, low balance) are the best accounts to add an authorized user. The reason for this is that the new authorized user gets all of the account’s history added to his or her account, no matter how old the account is.
To give the biggest jump to an authorized user’s credit score, only consider accounts that:
1. Accounts that are two years old or older.
An authorized user can be added at any time. However, if you’re looking to receive or give a credit boost, it’s not recommended doing it before the account is two years old. If the account is younger than two years, the credit score boost will be insignificant.
2. The account should have zero late payments.
Whatever history is on the account is transferred to the new account holder. Even if the account is presently in good standing, if it ever had delinquent payments it will hurt the new authorized user’s credit score. Past missed payments are transferred to the new account holder. For this reason, only accounts that have always been in good standing are recommended for adding an authorized user.
3. The account should have a low balance.
Accounts that are frequently maxed out or have a balance over 30% are not recommended for authorized user tradelines. Credit scores get a bigger boost if the revolving debt is low. On time payments are good, but if there isn’t much available credit left on the card the new authorized user will not see a good bump in his or her score. In fact, their scores could even go down as a result of being added to the account.
How Trade Lines Work
Average Age Of Accounts
The impact of a trade line on your credit report when it comes to AGE is that the trade line you purchase must be older than the oldest trade line account on your credit report.
Scenario 1: For example, if you have 4 accounts on your credit report and the oldest is 4, years, and the other 3 are 2 years old, this means that now the total age of all your accounts are 10 years old. Now divide 10/4 and you have an average of 2.5 for all 4 of your accounts.
Check out this scenario. You purchase a trade line that’s 10 years old and now you have 5 accounts.
1 account 4 yrs old
1 account 2 yrs old
1 account 2 yrs old
1 account 2 yrs old
1 account 10 yrs old
Total years for all the accounts are 20 years. Now let’s divide 20 years by 5 and now you have 4 years average for all 5 of your accounts.
Note: The older the trade line you purchase, the older your average account age will be.
Simply put: divide the ages of your accounts by your total number of accounts.
How Can Purchasing Tradelines Help Me If I Have Bad Credit?
When purchasing authorized user trade lines, and you get added to the credit card as an authorized user, it does not show on your credit report when you were added. Rather, the entire history of the account is reflected in your credit report, with some exceptions depending on the bank.
For example, if an authorized user is added to a credit card that is 20 years old, it will simply appear as a 20-year-old credit card that this person has on their credit report with an authorized user status. Therefore, the credit scoring algorithms often just assume this person has been on this card for 20 years. If the tradeline has a perfect payment history, this will add to your payment history and length of credit ultimately INCREASING YOUR SCORE.
Average Credit Limit
The impact of a trade line on your credit report when it comes to CREDIT LIMIT is that the trade line you purchase must have a HIGHER CREDIT LIMIT than the highest credit limit on your credit report.
Scenario 2: For example, if you have 4 accounts on your credit report and the highest credit limit is $1500, and the other 3 are $1000 each, this means that you have a total of $4,500 for your trade lines. Now divide $4,500 by all 4 of your accounts and you have an average credit limit of $1,125 for all 4 of your accounts.
Check out this scenario. You purchase a trade line that has $9,000 and now you have 5 accounts.
1 account $1,500
1 account $1,000
1 account $1,000
1 account $1,000
1 account $9,000
Total credit limit for all the accounts are $13,500. Now let’s divide $13,500 by 5 and now you have $2,700 average credit limit for all 5 of your accounts
Note: The higher the trade line you purchase, the higher your average credit limit will be.
Simply put: divide the number of accounts you have by your total credit limit of your accounts.
Higher Limit Tradelines
Since everyone’s credit report is unique. You only want to add tradelines that are superior in age and/or credit limit to what you currently have in your credit report. If you currently have high utilization, higher-limit tradelines may help with your overall utilization ratios. You should also know what the average age of accounts currently are. You only want to add trade lines that can increase your average age of accounts in a meaningful way.
Frequently Asked Questions
How Much Does Becoming An Authorized On A Tradeline Cost?
Expect to spend a few hundred dollars, if not more, on a seasoned tradeline or high credit limit tradeline. They certainly don’t come cheap; however, they could potentially save you a lot of money in the long run if you’re in the market for a new house or car.
What Determines The Pricing Of Authorized User Tradelines?
Age, Limit, and Balance. When searching for authorized user tradelines that will help boost your credit score, you should be looking for a tradeline with a significant limit, two years’ worth of payment history, and a low balance.
How Much Better Can A Credit Score Get From These Tradelines?
It depends on the items of your credit report and the tradelines being chosen. It doesn’t matter what situation; the credit score will never go down after purchasing an authorized user tradeline. On the other hand, clients’ credit scores may change little or not; each client is unique, and we will be able to formulate a plan that will best benefit your score. One definite scenario would be that if you have no previous credit score and decide to purchase an authorized user tradeline, your credit score will most likely be in the positive score zone.
Which Is Better – Primary Or Authorized User Tradelines?
It depends on what you need at the current moment. You can find yourself in two scenarios: either you have no existing payment history and no credit score, or you have several credit card accounts but need a boost. If you have no previous credit score, then it is preferred to get a primary tradeline, this way, you can get an established score to work off. You can get these by opening credit cards at banks and just getting any credit card with your name on it. On the other hand, if you already have a history and need a boost, it is better to get an authorized user tradeline to gain years of the payment history added to your report and help boost the score. This is usually better when you have already gained some primary tradelines, such as young credit cards with low limits.
Should You Buy A Primary vs. An Authorized User Tradeline?
You cannot buy a Primary Tradeline; the only type of tradeline available for purchase would be Authorized User Tradelines. Although it is possible to transfer over a Primary Tradeline, it requires a legal matter and is often much more expensive and, in some cases, illegal.