How Trade Lines can improve your credit score.
By Pree Dammond
Before going into the details, let me share with you what Trade lines are.
Trade lines are lines of credit where you are not the primary debt holder. Typically, anyone who co-signs for a loan on primary debt holder’s behalf will inherit a trade line of credit. The primary is obligated to pay their bills on time and when they do you will reap the benefits of an improving credit score.
Be Cautious: This method of improving your credit score is very risky. If the primary debt holder, defaults on the loan you will also inherit a bad credit rating.
My true to Life Story:
When I was 22 years old, I bought a brand-new Montero Sport XLS. The off the lot price for the vehicle was $23,789. I was able to finance the vehicle with some assistance from my father’s friend who was the owner of this high end restaurant back in my home town. I’ve grown to realize that it wasn’t the smartest choice for a college student to make, but it taught me financial responsibility at a younger age.
If I had to do it all over again, I wouldn’t. I could have purchase 5 other project cars for the price I ended up paying once it was paid off. By paying my loan on time, it did benefit my credit score. However, Randy (my Fathers Boss) reaped the benefits of being my co-signer. He soon after bought a new boat with his new found credit score. He really enjoyed those weekends at Lake Lanier.
This was my lesson in becoming more knowledgeable about Trade Lines of credit.
In summary, everyone isn’t as responsible as you would be if your credit was on the line. The other things to consider before co-signing with anyone are:
· You can’t predict situation that may occur in the primary debt holder’s life.
· Can you trust the primary debtor to pay their bills on time every month for the life of the loan?
· Are you able to assist the primary debtor if they become financially distressed?
· Are you able to pay the debt yourself if you had to?
· How important is credit in your life to begin with?
Having Trade Lines is a great way to boast your credit score but that option comes with extreme risk. In my opinion, it is not recommended unless you can take over the loan if primary account holder can not pay.