When shopping to buy tradelines, there are basically only two main variables to consider; (1) The age of the card and (2) the credit limit. All the other variables should be about equal which includes having a perfect payment history, low utilization (at or below 15%), the type of account (usually a revolving credit card), and reporting date. In most cases the name of the bank should not matter, except in instances where you may be blacklisted from that bank due to filing a bankruptcy and sometimes having unpaid collections with that bank.
So, with only two main variables to consider, why is it so challenging to be able to choose the right tradelines? The answer is because most people’s credit files are fairly complex due to their depth of history. People often have numerous data points in their credit file and almost all that data plays some sort of role in calculating their credit score. A person’s credit file is very unique and highly complex, making it very difficult to discuss how tradelines may affect anyone “on average.” Additionally, there are multiple credit scores, each with their own closely guarded algorithm that takes into account a very large amount of data points within someone’s credit report.
Let’s discuss each of these variables individually and we will start with credit limits since the general public seems to usually start there. In most of the free credit score simulators out there you can only change a very limited number of variables so when it comes to trying to guess how a tradeline may affect their credit score it only allows them to enter a new credit limit amount and then it generates a new credit score estimate. The credit score simulator (sometimes referred to as a credit score calculator) is assuming you are opening a new credit card with whatever limit you type in. Essentially, it is only looking at your overall utilization ratio and many professionals would suggest that you want to stay below 20% ideally. From our experience, we have seen that utilization ratios at 30%-40% or higher do start to pull credit scores down and the higher the utilization ratio the more your credit score will decrease, even if these accounts are always paid on time. Most credit specialists would recommend keeping your overall utilization ratio down below 20% or even lower.
However, things get much more complicated in instances where someone has seven established credit cards, for example, where two have zero balances, two are at 50% utilization, one is at 75%, and the last two are completely maxed out. Sure, buying some tradelines with high limits might be able to get the overall utilization down to the targeted 20% level but that does not eliminate the fact that that person still has five credit cards with high utilization and each of these five credit cards is still pulling down the credit score down due to high individual utilization.
Yes, in theory a higher limit tradeline can help lower someone’s overall utilization ratio, but this alone may not completely solve the problem of having credit cards with high utilization. The reason is negative factors are always going to play a role in the credit score and having any high utilization credit cards is a negative factor. However, having a lower overall utilization ratio would be a positive change and may still yield some benefit despite the fact that the individual credit cards with high utilization will still remain in the equation.
We have even heard of metrics in the secret credit score algorithm that looks at the percentage of high utilization credit cards in someone’s credit file relative to the number of credit cards they have. For example, if someone has two credit cards, one with a $5,000 limit where they owe $5,000 on it and another credit card with a $25,000 limit where they owe zero on it, their overall utilization ratio is relatively low at 16.67% but they would be at 50% on the percentage of revolving accounts with high utilization. In this example, the 50% ratio of high utilization cards would possibly have a negative impact even though the overall utilization ratio is within the ideal range.
There may be other reasons why some people are interested in adding higher limit tradelines to their credit file that have nothing to do with the typical goal of raising their credit score. For example, some people believe that having higher limit accounts on their credit file may increase their odds of getting approved for higher limit credit cards or may help improve their odds of getting approved for other types of loans. We do not have any knowledge about the validity of these beliefs nor do we help people with funding in any way, but we are aware that strategy exist in the marketplace. This is an additional reason why some individuals might be interested in a high limit tradeline even if there is not very much age on the account, which also makes the cost of a tradeline cheaper.
This leads us to the second variable to discuss and that is the age of the tradeline. We feel that age is the most important of the two factors of a tradeline. In general, a credit score is broken down like this:
The utilization ratios fall under the “How Much You Owe” category which accounts for about 30% of your score. Again, if you are only improving the overall utilization ratio but are still being pulled down by individual card utilization ratios then you may not be benefitting from the full 30% of the power this category has so your benefit may be as little as 10-15% if you still have individual cards with high utilization ratios. However, the tradelines we offer are going to have a perfect “Payment History” which falls into the category affecting your score by as much as 35% and it has the ability to affect the “Length of Credit History” category which accounts for another 15% of the score. When added together the “Payment History” (35%) plus the “Length of Credit History” (15%) amounts to about 50% of a credit score. These two categories which account for about 50% of a credit score are being affected by the age of the tradelines. Credit “history” has to do with age. This is why we believe age is king when it comes to tradelines, making “seasoned” tradelines the most valuable type.
In the age category (just like the utilization category) there are several age related variables as well. To name a few the credit score algorithm may look at your average age of accounts, the oldest account in your profile, the number or percentage of non-seasoned accounts (less than 2 years old) in your file as well as the number or percentage of seasoned accounts in your file. Also, different scoring models may or may not take into account closed account data and have varying degrees of how much weight they give to closed account information. To illustrate an example, we have seen a credit report of a person who had over a 700 credit score with no open accounts at all. So 100% of that 700 plus credit score was made up of data from closed accounts only. We also know the opposite can be true where someone has zero open accounts but several closed accounts with derogatory information and their credit score is very low, all from closed account data. So it is safe to say that closed accounts still can play a significant role in someone’s credit score since it is still part of their credit history.
The most common age related variable that most credit advisors will talk about is the average age of accounts. It is commonly believed that this variable may be the most powerful age related factor. In working with tradelines that may affect this average age of accounts, most people under estimate how difficult it is to significantly affect an average, especially when there are multiple accounts already appearing in your credit history.
In addition to the average age of accounts, there is another age related variable which is the oldest account in someone’s credit profile. This one is very straight forward, except it may be split into two categories: open accounts vs closed accounts. It is assumed that open accounts usually weigh more than closed accounts and obviously older is better.
For illustration, here are a few hypothetical examples of how to calculate the average age of accounts and how new tradeline data gets factored in.
Example 1: Looking At A Thin File For Simple Illustration
Card 1: 0.5 years old
Card 2: 0.5 years old
Card 3: 1.5 years old
The average age of accounts here is 0.833. The way you figure that out is add up the total number of years and divide that by the total number of accounts. (0.5 + 0.5 + 1.5 = 2.5 years total, then divide by 3 (the number of accounts) = 0.833 years average.) If your goal was to get the average age of accounts up to 2 years old by adding one tradeline, the new tradeline would have to be about 6 years old. (0.5 + 0.5 + 1.5 + 6 = 8.5 total years divided by 4 total accounts = 2.125 average age of accounts.)
Notice how much older the new tradeline had to be in order to simply get the average age of accounts to be 2 years old on a very thin file. Many people would not have guessed that they needed such an old card just to get the average to be 2 years old. To illustrate this point if someone were to only add a 4 year old tradeline to this mix, the average age of accounts would then only be 1.625 years and this is assuming a person only has 3 revolving accounts (opened or closed) in their credit file which is very rare. The more accounts a person has the less impact a single tradeline will have due to simple mathematics of how an average is calculated.
Example 2: Looking At An Established Credit File With Multiple Open & Closed Accounts
Card 1: 4 years old
Card 2: 8 years old
Card 3: 6 years old
Card 4: 4 years old
Card 5: 7 years old
Card 6: 7 years old (Closed Account)
Card 7: 15 years old (Closed Account)
Card 8: 13 years old (Closed Account)
Card 9: 9 years old (Closed Account)
Card 10: 12 years old (Closed Account)
The average age of accounts here is 8.5 years old. The way you calculate that is add up the total number of years and divide that by the total number of accounts. (4+8+6+4+7+7+15+13+9+12 = 85 years, divided by 10 accounts = 8.5 average age of accounts.) Let’s say hypothetically the person’s goal is to get their average age of accounts up to 10 years old by adding one tradeline.
Please stop and take a moment to guess how many years a new tradeline would need to be in order to make the average age of accounts 10 years in this example.
They would need to add a tradeline that is 25 years old in order to get the average age of accounts to be 10 years. (4+8+6+4+7+7+15+13+9+12+25 = 110 total years divided by 11 total accounts = 10 year average age of accounts.)
Notice how huge of a jump in years is needed in order to change someone’s average if they already have a lot of accounts in their credit file, even if they are closed accounts. Most people under estimate how difficult it is to really change an average and even most “professionals” who are usually just commissioned sales people under estimate how these numbers actually work out. Until you actually do the math yourself do not just blindly trust what someone suggests for you. To make this process easier to calculate your own average age of accounts and utilization ratios you can use our Tradeline Calculator to examine your own credit file.
It is easy to see in Example 2 above that if this person did not do the math and just purchased a tradeline that is say 18 years old for example, with a $20,000 credit limit, that cost $1,000 they might just assume that since it was an expensive tradeline with a lot of years and a strong limit that it should “obviously” be super powerful and they should definitely see positive results. However, in reality, that card that is 18 years old would only increase the average age of accounts to 9.36 years and it is very possible that increasing one’s average age of accounts from 8.5 years to 9.36 years may not have very much impact on their overall credit picture. As you can imagine this person can easily be very disappointed in their results and the reason for this simply comes down to them not knowing what they are doing and they did not take time to do the math.
As a side note, if this person were to choose to purchase a tradeline that is 7 years old with a $30,000 limit, on the surface that might look like a decent tradeline to buy but that would actually decrease their average age of accounts and could actually hurt their credit score, even though that tradeline might have a $750-$1,000 price tag. We illustrate this to show that not knowing how tradelines work can actually hurt your credit and be a complete waste of money. For this reason we believe education is the best service we can offer.
Authorized user tradelines can be very effective for many people, assuming that they added tradelines that are actually superior to what they already have in their credit file. On the other hand, since many people are not educated about how the system works it is very common for people to choose the wrong tradelines that do not help them very much. Compounding the confusion, it is very difficult to find the best tradeline company to work with. We believe that educating our customers is the best thing that we can do for our community and offering affordable tradelines makes them more accessible to the people who need them most.
Here is a link to a Tradeline Calculator to help you get a clearer picture of where you are at and to help point you in the right direction on your next tradeline.