Boosting Credit Score Via Informal Lenders?
Hi Everyone,
I’m curious if anyone is aware of legitimate firms which provide short-term, contractual, unreported personal/commercial loans to customers for the sole purpose of boosting the clients credit score. The idea being the firm issues a loan to the client which is not officially reported to any credit agency or financial institution. The net effect being an overall increase in the clients asset position while no identical offsetting debt is reported
in the clients credit score, thereby boosting the overall score and the credit received based on that score. Basically, manipulating the debt-to-asset ratio.
Does anyone know if legitimate companies or individuals exist whom provide this service? Besides the obvious loan shark response?
At the moment, I’m trying to start an international trading company which exports consumables to foreign countries. I've got a few friends with cash whom might agree to some variant of the Russ Whitney loan-loan reapply strategy. But I'd prefer to go through commercial lenders if some do exist.
As side note, I don’t understand how the Russ Whitney strategy could theoretically work when applied by only one individual as most credit reporting agencies have access to the amount and type of debt held by most individuals at most banks? I concluded this after taking a look at my own personal credit report issued by Equifax last year which reported my RBC 15 grand line of credit had been maxed out.
Perhaps reporting protocol differs in the US? I don’t know. I’m no expert. But to me, it seems somewhat presumptuous to assume credit reporting agencies don’t have access to the comprehensive debt amount held by any individual at most banks. If that’s true, then flipping bank loans to establish increasing levels of personal credit would be undermined by the cumulative debt amount reported on each successive credit report called by each bank applied to. Am I wrong?
Any insight, help or answers to these questions would be much appreciated.
Thanks in advance!!
[ Edited by achilles on Date 03/14/2004 ][ Edited by achilles on Date 03/14/2004 ]
as the way i understand the rw deal is 1000 in savings go back month latter borrow againist the passbook, then go to another bank and do it again and so forth until you have made a circle with 3-4 banks . this can work since you make interest only payments per month which is what the loan is made in. payments are reported your score goes up the object is you don;t spend the money and your paying off the loan in the circle from one to the other after six months one pays bank the 1000 to 1 hopefully the manager like you and starts to offer larger signiture loans, borrows again from 1 and pays 2 says says great guy borrow again from 2 to pay 3 and so forth. hope this helped and yes it can work for one person. :-D
Debt to asset or debt to income ratio has absolutely ZERO effect on credit score.. it only effects loan approvals. The only thing that effects credit score is account aging, number of accounts, current balance to high limit ratio, types of accounts...yada yada. There is no where on a credit report that says anything about assets or income. I am a mortgage broker and have looked at hundreds of these things.
However, having more assets that are not shown as debts WILL make it easier to get a loan approved.
SSjustin -
The vast majority of lenders dont rely EXCLUSIVILY on credit scores to determine the credit granted to applicants when requested loans represent significant $$.
Yes, tradtional scoring methods don't incorporate debt-to-asset ratios in their formulas. But when applying for significant credit - either in cards or loans - lenders will usually augment credit scores with assessments of the applicants assets contrasted to their debts.
Perhaps I should have been more specific in what I meant by ' credit score.' I was reffering to the overall score, not just a fico score. The overall score, is some traditional credit scoring method augmented usually with in-house stats that often include a debt-to-asset ratio assessment plus others.
[ Edited by achilles on Date 03/25/2004 ]
If it makes sense for lenders like you to consider the debt-to-asset ratio when determining loan amounts, why wouldnt credit card companies use the same logic since they're in the same business of lending money - just via a different medium?
The answer is they do. Its just not formally incorporated into the fico.
This is exactly the point I was making.