In the Lord of the Rings, Gandalf and the rest of the fellowship try to go over some snowy mountains, but they can’t make it over the pass because that rascal Saruman is casting spells that result in unpleasant weather, so the crew decides to try their luck in the mines of Moria, which turns out to be a long, slow slog through the dark, fighting cave trolls and goblins and a giant fiery Balrog. Seems like a whole lot of trouble to get from point A to point B, but that’s life in Middle Earth. What correlation do hobbits have with credit you may ask? Well, credit is like those mines in Moria. They can be a tough, tough road. But first, let’s address that first sentiment, that credit scores are a scam.
How is my credit score even a thing?
The three credit bureaus have fascinating histories. We won’t get into them here, but they’ve been around for a while–Equifax was started in 1899 by the Woodford brothers in Atlanta as an entity that would sell data on credit-worthy customers. FICO, as we know it, came about in 1989. FICO is compiled by the three credit bureaus to create scores based on information they get from banks and other institutions. How many digits are in a credit score? Three, based on a scale from 350-850. So here you go, wait, I didn’t authorize that! That’s why it’s a scam! Well, okay, but that’s the reality we live in, might as well say money is a scam since we made that up too. So, wherever you are, how does credit help you?
What if my credit score is 0?
You are in the best possible position. And you think “increasing my credit score is priority one.” Whether you are young (or not and you just have never used credit), or someone has done a great job of cleaning your report, if your score is 0, or NA, more likely, then you are in a great position, because any positive data you put on, like putting a tradeline on your credit, will give you a stellar score quite quickly. Or you can get a secured card and go the traditional route, though that will usually take six months to a year before you can start building unsecured credit history, which is the solid gold backbone running through any great credit score. But what if your credit score is in bad shape?
My credit score is 560. Help!
Sound the alarms, up periscope, red alert! If your score is in the 500’s, or lower, you likely have a plethora of bad data on your report that needs to be taken care. You’ve probably done multiple searches on some variation of: how many points will my credit score increase when a collection is removed? It’s not an easy question. What other negatives do you have? If you only have collections as negatives, then you may or may not see a jump, depending on how much positive data helping you have on your report. If you’re pulling your hair out over that, don’t, it’s complicated stuff, but if you’re looking for something like a 100 point credit score increase, getting those negative collections off is the first step.
HOW TO ESTABLISH TRADELINES FOR MY COMPANY
Okay, so removing collections raise credit score, what else can I do?
One thing that we see fairly frequently, are people looking for a credit boost with tradelines because they have maxed out credit cards. And this is where we wish we had some better news, because having maxed out cards is pretty much the equivalent of being in the mines of Moria. It’s perhaps going to be a long, slow climb out from under that, but the other choice is bankruptcy, or some kind of debt consolidation (which we never recommend unless you’re able to do it with some kind of your own collateral–house, or loan). So if you’re asking “will debt consolidation help my credit score?” Potentially, yes, but you still owe it, and how are you consolidating? After all, if your score is low, how can you get a loan to pay down your debt at any kind of good rate? It’s not the best news, but doing it the right way, even if it takes a good while, is better than paying someone to ruin your credit while they claim to be helping you, which is what most debt consolidation companies end up doing.
