Debt can destroy any dreams you have of a financially independent future. That is why it is so important to reduce debt and maintain a relatively high credit score.
Debt is and of itself isn’t the entire problem. Excessive debt is a drag on wealth creation, but what debt does to the household budget is even more damaging than the original debt itself.
And debt can sneak up on anyone. Student loans, medical bills, job loss or a failed business venture can turn a bad situation into a nightmare even bankruptcy can’t deliver you from.
Once calamity strikes it is near impossible to shake the effects in every financial aspect of your life. A medical issue or mounting student loans can lower your FICO score which leads to higher costs in almost every other area of your life. Auto and homeowners insurance rates are higher for those with lower FICO scores. Many landlords refuse to rent to people with a FICO score below a certain level or charge a higher rent. And the interest rate you pay is higher.
Financing a home or car is an obvious way a poor credit rating affects you. But the damage doesn’t end there. Once a financial rough patch arises it is harder than ever to shake the damages and move forward. The scoring system doesn’t care about you; it is an algorithm developed to determine risk and it is a far from perfect system.
The worst part of a low FICO score involves the digging out process. Costs for everything are higher and many employers avoid potential employees with low scores. With costs higher and job prospects lower the downward spiral is hard to step off of.
The sobering fact is most people have at least one rough spot financially in their life. An economic downturn with accompanying job loss can set the spiral in motion. A medical emergency is all too common in our modern world. Physical and mental healing are only the beginning. Even before health is regained the financial pain starts to set in.
Rebuilding Your Financial Life
We will start by discussing the most powerful way to reduce your debt burden and increase your chances for a better job, lower rent and lower auto and homeowners insurance before we move to rebuilding your nest egg.
The largest component of debt is interest. A $165,000 30-year mortgage at 6% will create over $190,000 of interest if no prepayments are made. Credit card and other higher interest debt is even more damaging.
Earning more money to pay down debt faster is a double-edged sword. The more you earn, the more income taxes you pay which begins to make you feel like Don Quixote chasing windmills.
Frugality plays an important role in reducing debt. Spending less than you earn is a requirement for reducing your debt burden. But some things are hard to apply frugality to. Those higher insurance bills and rent are hard to change until you are better off financially and your FICO score climbs. And excessive frugality is hard for many people to maintain. If you can’t stick to the plan you are lost.
It’s the old dilemma: you can be more frugal when you have more money!
It all boils down to your credit score. A lower score increases costs when you can least afford them.
It is possible, however, to improve your credit score before your financial situation is completely fixed. The weight of medical bills takes time to work through and higher bills for everything else doesn’t help! If you can improve your risk appearance with a higher FICO score you can reclaim your life quicker.
It Helps to Have Friends
There is a simple (and legal) way to improve your FICO score with the help of friends or family. I discussed this at length a few years back, but will provide a short review for our discussion here.
On your own, only your reported financial information is used to calculate your credit score. Of course, a hardship may have destroyed that score that served you so well in the past.
You can rebuild your credit score before you turn the financial corner with some help. This is where tradelines come into play.
A tradeline, in short, is a line of credit. If you are trying to dig out of debt then more tradelines seems like a crazy idea, but bear with me because this is a powerful tool to reclaim your life and then a potent source of easy income afterwards.
Your credit score is low because you have too much debt compared to how much credit limit you have and/or bad marks on your credit report.
You can’t wipe bad marks away regardless what you’ve been told or read. Avoid the scams! The only cure for late payments and bankruptcy is time. The more time that passes since the bad marks on your report the less affect they have on your overall score.
However, you can increase the number of good marks on your credit report with tradelines. A tradeline can also increase the amount of credit you have compared to the outstanding balance (the utilization rate). The second point is one of the most powerful tools you have to increase your credit score in as short as a few months.
Having a friend or family member share a tradeline is the cheapest way to solve your problem. You add a tradeline to your credit report by having a tradeline from someone else included in your credit score. It works like this:
Say you are recovering from a job loss and finally are back working or recovering from medical bills. (For any of this to work the bleeding has to stop. If you are still digging the financial hole tradelines will do you no good.) You probably have some late payments and hold account balances close to the credit limit on your credit cards. This crushes your credit score.
The bank is unwilling to extend more credit with a higher credit line and the interest rate is killing you. A really good friend (or family member) could add you as an authorized user of their account. They will not actually give you access to the account! (They want to keep their good credit score.)
When you are added as an authorized user of a personal account, their payment record (they should have no late payments nor a high utilization rate!!!) is added to yours. This means their clean payment record and credit limit with low utilization rate is used to calculate your credit score.
Let me reiterate. You will have no access to their credit card or information! You are merely added as an authorized user.
For this to work best you want the account your friend is using to help you with to have a few characteristics: an account open for at least several years (the longer the better), a high credit limit and only a small amount of usage.
Ideally the account you are added to should have at least one usage a month (so it reports to the credit bureaus) and is paid in full each month.
Real Life Example
I used my knowledge of tradelines to help an employee recently. She does good work and I wanted to keep her working for me. However, she was struggling with financial sins of the past.
Student loans she acquired to start a new career were an anchor around her neck. This lead to high interest credit card debt and a high interest auto loan. She used her head to stop the bleeding and get her life back in order. (This also makes her a better employee.)
Her credit score was scraping the basem*nt. She didn’t have many late payments (maybe two or three a few years back, but she always found a way to pay her bills no matter what).
Her credit card and auto loan interest rates were killing her. To rub salt in the wound she also paid higher insurance rates.
Once I was comfortable she would stay the course I added her as an authorized user to one of my personal credit cards. (She has zero access to this card so there is no risk to me.) I had a small ($69.50) bill on auto-pay going on the card monthly and the credit card was also on auto-pay so I was never late paying the credit card bill. The utilization rate was low, the credit limit high, the account open for years and the payment record pristine.
In less than two month my employee enjoyed a credit score approaching 100 points higher. She immediately shopped her auto insurance and cut her premiums nearly in half. Her other credit cards also lowered her interest rate when she asked.
The lower interest and insurance premiums allowed her to pay off her debt faster. She now also owns a home with a locked-in low interest rate mortgage and a bright future. She is paying off the debt she has faster and she is getting married in two months so she is a very happy young lady knowing she is going into her marriage with her finances under control.
Talk about a tax-free fringe benefit!
Looking for a Friend
Unfortunately, many people with financial/credit problems don’t have a friend or family member (or employer) who can help. There is a growing industry helping people with such a need.
You can actually buy tradelines to get the same benefits we talked about above and enjoy the experience my employee had.
I researched a large segment of the industry a few years back and when I was satisfied with the policies and procedures of one company I decided to promote their work. As with anything, not all businesses are reputable. I ran across plenty of those, too.
The goal is to buy clean tradelines to turn your financial situation around. (I’ll share the name of the company in a bit.) The goal is to derive more benefit than the cost.
Example:Let’s assume you are paying an extra $400 per year in auto insurance, $50 more for rent and your interest rate on credit cards or auto loans hover at 10%. The extra interest you pay per year due to a poor credit score we will assume is $1,000. This totals $2,000 in extra expenses per year and you get nothing extra for the pain.
You could always dig your way out slowly. That could take years. Or, you could buy a few tradelines for a heck of a lot less than $2,000 and see your credit score improve in a month or two. Realistically you can see enough credit score improvement in a few months where you can get your insurance premiums reduced and interest rates lowered.
You can apply the same strategy when planning a purchase. If you are looking to buy a car or home you can increase your credit rating a few months in advance to qualify for a lower interest rate loan. The money saved with a lower interest rate will pay back the tradeline costs many times. Tradelines can make a very profitable investment!
The company I use to sell tradelines (you might actually get one of my tradelines if you use the company I recommend since I sell my tradelines there) is Tradeline Supply Company. They have great articles to help you decide which tradeline will work best for you. (Be sure to say “Hi” to the guys over there. I was part of their growing process a few years back and when I run across them at conferences we catch up. It’s good to hear success stories.)
Final Notes
Tradelines are a legal tool to regain your financial life. This is not credit repair! Prior sins are still prior sins. What you are showing is that you have turned the corner with your financial problems. You can’t keep digging the hole and expect tradelines to bail you out. Tradelines are a tool to improve your life when things go horribly wrong. Use your second chance wisely!
Turn Tradelines Into a Massive Income Stream
Now that you turned the corner with your finances you can pay it forward by selling tradelines with Tradeline Supply Company. You might pay a few dollars to jump-start your finances, but now that you are making progress you can sell tradelines even if your credit isn’t perfect yet.
The extra money you earn selling tradelines can help you pay off debt even faster and help you build a sizable nest egg. I published on selling tradelines for profit here. Many readers of this blog have tradelines paying their entire mortgage and more. Now you know how you can join them. Call Darren at Tradeline Supply Company at 888-844-8910 to get started earning up to $1,000 per month and more.
You can thank me later.
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