Tradelines... Lemme just say that again… TRADELINES...
If that doesn’t send a shiver down your spine, you can’t afford to miss this. This incredibly scary and dangerous practice is infiltrating our industry and it has huge consequences.
Hundreds of thousands of people are faced with life-altering ramifications and as a Credit Hero you MUST know the truth so you can educate and protect your business and customers.
- I’m exposing tradelines for what they REALLY are...
- Sharing why you SHOULD NEVER use them...
- And exposing why tradeline brokers are one of the scariest things about the credit repair industry.
Where Does This Come From?
If you’re not already spooked over the buying and selling of tradelines, by the end of this article, you’ll be haunted by it.
The evil giant banks and credit card companies have always wanted their cardholders to use the credit cards they issue as much as possible for one reason - to take as much of your money as possible by charging you interest and fees!
Their dream customer is the one who’s drowning in FOREVER DEBT.
And because of that - they often give a 2 for 1 option, allowing the primary cardholder an way to open “authorized user” accounts.
These are meant to be limited to family members and close friends because whomever the account holder allows to be on the card, can USE the line of credit - leaving the FULL responsibility to pay down the debt, to fall on the shoulders of the primary account holder.
Why This Is Important
- Once those “authorized account holders” began noticing they were inheriting all the years of positive on-time payments and seeing their scores get a hefty boost, it became a sensation called “piggybacking”. Suddenly an entire niche inside the credit repair industry was born.
- But, as with any loophole, people will find ways to exploit it, and boy did they ever! Entrepreneurs began building networks of people that were willing to rent out user spots on their credit cards to complete strangers as authorized users, and they charged a big fee to do it.
Some credit card companies allowed as many as 50 authorized users on a single card, and all of those authorized users would quickly get a big boost to their score, because the scoring models would be tricked into calculating all of the aged positive credit that belonged to the primary account holder, to the authorized user.
Plus, if the account had a balance and low limit, it could drastically reduce the piggybackers utilization which then would increase their scores even more!
- Now… that was YEARS ago - back in the good ole days. But hear me when I say, times have changed! A few years ago, the banks and lenders began noticing technically unqualified buyers would suddenly be qualified for major purchases they otherwise would not be approved for… and as you can imagine, that meant, they started seeing an unusually high number of defaulted loans because of it.
It became an unfair advantage and the credit scoring companies like FICO and others made changes to how authorized user accounts would impact credit scores. Once those changes happened it should have put all those tradeline brokers out of business… but many still operate to this day.
What You Need to Know
- Any credit repair businesses or brokers who are still selling tradelines, are taking on HUGE risk, and operating illegally AND unethically.
The fact is, not only are purchasing tradelines not effective but they can land you in jail. Most lenders now consider it fraudulent to submit an application if your credit report shows accounts that don’t belong to you. And in many cases, mortgage lenders consider it mortgage fraud, which is a federal offense.
- But, there are ways that are ethical and valid that can help your customers. This is called piggybacking. Now, there’s a HUGE difference between purchasing a spot on a stranger's credit card, versus piggybacking a family member or spouse's credit card. Ok, so buying your way onto a stranger's credit card so you can qualify for a loan may be considered fraud -- but if your immediate family member or spouse adds you, it’s not.
- It’s also important to know that buying a tradeline from a company or a stranger not only opens you up to huge legal consequences - even going to jail for fraud - but it doesn’t even help! The changes made no longer give you the ability to inherit the payment history or reduce your utilization. But, if your immediate family member or spouse adds you, it does.
So, there are a few tips you should be aware of if you are either planning on piggybacking your spouse or an immediate family member.
- Some banks, lenders and institutions may automatically remove any authorized user accounts from you or your clients credit report at the time of application. They do this because they want to see your true score based on your true account history, without the authorized user account.
- The only way you can ensure the account that you or your client is piggybacking will actually be taken into consideration is to become a “joint” account holder.
- Authorized users have zero responsibility to pay. If the primary user on the account doesn't pay, the authorized user can simply demand that the account be removed from his/her credit along with the missed payments or any other negative information that may have taken place.
On the flip side of that, joint account holders have equal responsibility to pay back any borrowed money and they cannot be removed from the card. They have a permanent obligation to pay. So even if the primary cardholder files for bankruptcy, and you are a joint account holder - you can still be held accountable.
That’s why it’s very important that you only do this with people you truly trust!
So, if you want to keep yourself and your clients out of jail for fraud…
If you want to get ethical and legal RESULTS…
Stay far away from tradeline dealers. It’s just not worth it. People do go to jail.
Instead, educate your clients on how they can piggyback a family member’s card, or their spouses card as an authorized user or joint account holder!
It will help and NOT harm their life and credit!
One of the really good guys in our industry is Jose Rodriguez. Jose began his credit repair journey when he was trying to get his finances on track after leaving the Marine Corps. Soon he began helping his family and friends to fix their credit … and now, he runs a multi-million dollar credit repair company FROM HIS HOME!
At our past Credit Repair Expo, I asked Jose about the practice of buying and selling Tradelines, and he said, if you’re considering purchasing tradelines for your clients ask yourself, “is it ethical, legal and moral?”
In Jose’s opinion, tradelines are a “thing of the past, and a grey area in business ethics.”... So if our millionaires don’t need them and they’re running 7-figure businesses, you don’t either!
And, if you’re just starting or even thinking about launching a credit repair business but unsure what to do AND EVEN what NOT to do??...
How about I give you hyper-focused attention and hold you by the hand while you launch and scale your credit repair business in just a couple of weeks?
Would you like that? Then I invite you to join the next Credit Hero Challenge starting in just a few days!
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