Your Credit Report Is Your Most Important Financial Tool
Posted on 18 December, 2022 by Miranda Bottas in Finance
While it's not a financial instrument and holds no actual true monetary value in itself, your credit report is the most valuable financial tool you can ever have.
Is your credit report more valuable than cash? That's a highly debatable question and depends how much cash you need, or, how much cash you have at your immediate disposal. If you had millions of dollars in savings, could your credit report still be more valuable? That depends on what it says, how much you earn, and what you can achieve with the simple three-digit score that the report represents.
If the average person with the average income had an excellent credit score with a perfect or near-perfect history it would most likely give them access to far more opportunities than the amount of cash savings they have. A vast majority of people nowadays don't have enough cash savings to pay their bills for 6 months if they had no income. In fact, the vast majority don't even have enough cash reserves to last them 3 months without working. A large part of the population in the USA literally lives month-to-month, or even paycheck-to-paycheck. This means that credit is by far their most powerful tool, and without it they wouldn't be able to live the lifestyle they live - let alone make ends meet.
We're living in a debt-fueled system where credit lines and perpetual debt is what makes the financial wheels turn. Credit makes it possible for most consumers to live comfortably and if none were available there would be far less homeowners, far less new cars on the roads, and much less consumer spending on goods that are not directly related to sustaining life. In other words, we live in a world where credit makes everything possible in one way or another, and without it the current economic model - and our way of life would cease to exist.
Whether you make a lot of money or a little money, your credit report gives you the power to purchase what you need when you need it, or, what you want when you want it... but only if that credit report shows a good score and displays accounts that are in good standing. If your credit is bad, over-extended, delinquent, or in collections you don't stand a chance at utilizing it for any sort of further gain. This is a key point to remember. Once you're in the hole, it takes a long time to dig your way out. Clearly you'll be paying more interest and making more payments for longer periods of time, but the biggest downside is all the opportunities you'll be missing out on. If your credit is well-maintained, even if it's not very robust, you can continue to use it as a tool to open more doors for personal economic growth.
Guard Your Credit Report With Your Life
Now hang on a minute - we're not saying your credit report is worth more than your life, even if it may be worth more than cash in some circumstances. Yet it really is very important to have a solid understanding and education of how your credit can be utilized to become more wealthy, to take care of unplanned events, to handle emergencies, or maybe just to take a spontaneous vacation that you and your spouse desperately need after months of hard work.
It really is a nice feeling to know that you have $5k, $10k, $20k, or even $100k in available credit in the form of just credit cards. And that's only for starters. If the use and utilization on those cards is good, you can be approved for increased limits. Not only that, but you'll easily be approved for loans that fall within your budget. Whether you make $40k a year or $500k a year, there's always a lender ready to provide you with a loan for whatever you want to buy as long as you have a reasonable means of income for paying it back. But more importantly, even with a great job and a high income you won't be getting any loans at all if your credit score is low, tainted, or if your overall usage is stretched too thin.
This is why we say "guard your credit report with your life". You never know when that opportunity may arise and if you're not prepared, you'll miss out. It's also one of the reasons we opened this article with the question of whether or not your credit report is more valuable than cash.
As an example, do you have $140k in cash to purchase the deal-of-a-lifetime rental property if you stumbled upon the possibility? If so, you can easily buy it with your cash. However, all your cash has now been converted into an asset. It would be much wiser to use $10k in cash as a down payment and secure the mortgage loan with the lowest interest rate possible and good repayment terms. This leaves you with $130k in cash flow, and a new $140k asset. You could repeat the process 10 times and have 10 different rental properties. And even if you didn't have the $140k to buy the home, with good enough you can still easily finance it as long as you can swing the down payment. On the other hand, without a great credit profile, the average person won't be able to finance a home with the intent of using it as a rental. This means you missed out on a great opportunity because you didn't have the credit score and you don't have the cash.
To be honest, most of the time, we don't have the cash. And if we do, why should we part ways with it all for a single purchase when we can use it as a tool to make more money for ourselves when used in combination with our credit? That is the whole point here. Credit grows. Credit becomes stronger and stronger with time and responsible use. As that score climbs a bit higher, and with each year that passes which your income is growing, your repayment history looks better. This is all followed by bigger and better possibilities for you as time goes on.
My Credit Is Good, But Not Great. What Can I Do?
There's a big difference between good credit and great credit, while excellent credit takes things to a completely new level. But how do you get there? Most people will tell you the same thing: "Time, patience, and a lot of planning". The truth is they're completely correct. It takes time to build a great score. And while a somewhat great score can be achieved with nothing more than a couple of credit cards and two years of on-time payments, your report will still lack the history and diversity to actually qualify for something like buying a home. You'll need to wait, add more revolving accounts to your report, and show that you're experienced in being responsible with the repayment of various types of loans, and have other things such as the employment and banking history for the lender to justify something long-term like a 20 or 30-year mortgage loan.
What we can do with good credit in the short term is bump it up. This can be done rapidly and temporarily in instances where everything is in place, but the improved score will either help you secure the loan that you currently cannot, or, open the door for a much better lending agreement.
One of the secret tools for doing this "bump" is buying tradelines. And when we say tradelines, we mean authorized user tradelines. These are essentially a service you pay for where a primary credit card holder with exceptionally high and old credit will add you to their account for a fee. But let's get a few things straight - they won't be adding you to their account so you can spend their money or use their credit card. Let's explain.
When you become an authorized user of someone's credit card, the lending institution (typically) begins to report that specific card to the three major credit bureaus just as if it were your own. This means within a very short period of time after making the purchase, your credit report begins to show the tradelines. And it doesn't show them as a purchase, but it does show that you're an authorized user rather than the primary account holder. However, even that status is enough to send your score roaring upward like crazy - especially when you buy the right ones with much higher limits and an account age than anything you currently hold.
To explain it as simple as possible, you're paying a premium to get a good percentage of power added to your report from the card of an individual with perfect credit history. It's a common practice, but it's also not as common as you'd think. It's also completely legal, safe, and can deliver the increase your score requires to meet your specific financial requirements for a variety of reasons - from home loans to auto loans, rental approvals, job screenings, business loans, and much more. You can learn more about them today or even get started browsing tradelines for sale to see what they look like from a cost perspective.
Either way, this is one thing that even people with great credit won't want to pass up. Buying credit card tradelines at strategic times and with the right intent can cut years or even decades off the time you'd need to build up not only your credit profile but your overall wealth and net worth.
The Value Of The Credit Report Will Continue To Grow
With the current state of worldly affairs, it seems obvious that credit is not only indispensable but also something that will hold more and more value in the coming years. If interest rates rise, if inflation continues upward, or if the economy continues to drag along we won't have easy access to generate cash like we did during better times. We may be heading for a recession, and that means less work, less movement of money, and an overall depressed economy. The good news is times like that can be some of the best times to purchase assets if you're patient and prepared.
Keep an eye on your credit, make sure your report is a sharp as it can be, and learn how to utilize that three-digit number known as a credit score to your fullest advantage. If you play your cards right, you'll come out on top of the game and ahead of those who didn't take the time to manage their credit wisely. A little education and wisdom goes a long way when it comes to leveraging its optimal potential., so stay focused and you'll continually reap the rewards of the most powerful financial tool available.
No, Buying Tradelines Is Not Illegal.