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You may have heard the expression “credit tradelines” before but had questions about what it means and how it may affect your credit. Keep reading for a complete overview on everything to do with credit tradelines.
Credit tradelines is a term used by the credit industry to describe accounts on credit reports. Some examples of credit tradelines are credit card accounts, mortgages, auto loans, student loans and personal loans. Each tradeline is listed on your credit report, and this information is used to build consumer credit scores. For this reason, it’s crucial that all your credit tradeline information is accurate.
Credit tradelines on your credit report include the following information:
While credit tradelines are supposed to include all the above information, it’s common for some of this information to be missing. Creditors report this information to the credit agencies and they often can—and do—miss providing some data.
Your credit score is determined by the credit bureaus who collect information from the various tradelines and display it on your credit report. All the information provided for each credit tradeline applies to your score; however, each data point may be weighted differently. For example, payment history is weighted much more heavily than new credit accounts.
If you don’t have any tradelines, it’s impossible to have a credit score. In fact, you must have at least one tradeline that’s open and has been active in the last six months to receive a credit score.
The three categories of tradelines are:
It is wise to have a careful balance between your tradelines and your credit score. If you have too few tradelines, it shows a lack of credit experience. However, if you have too many tradelines, it can imply that you’re too reliant on credit. For an optimal credit score, it’s essential to strike a good balance. Focus on taking care of each tradeline with on-time payments, low balances and low credit utilization. And be mindful when opening new credit tradelines.
Yes, you can add tradelines to your credit report by opening a new account, such as a credit card, car loan or personal loan. Of course, you’ll need to apply and be approved to open this account.
As long as an account is open and active, the tradeline will remain on your credit report. Many tradelines have long lives—for example, car loans for 10 years or mortgages for 30 years. When you close a credit tradeline in good standing, each credit reporting agency will decide how long to keep it on your report. Generally speaking, most credit reporting agencies keep closed tradelines on your account for 10 years.
Closed accounts that have a negative item associated with them can stay on your report for up to seven years, but there are some exceptions, such as bankruptcies, which can remain for 10.
If an account has incorrect information, you can dispute it with the credit bureaus to have it removed from your report.
Some people with a thin credit profile consider becoming an authorized user on someone else’s account. Known as “piggybacking,” this allows you to add additional credit tradelines to your report and benefit from another person’s credit activity. While many people become an authorized user on a friend or family member’s account, you can also opt to buy credit tradelines. This is when an individual buys or rents an authorized user position from a stranger.
However, buying or renting credit tradelines from a stranger isn’t recommended by financial experts for a few reasons.
Unfortunately, there’s no guarantee buying or renting into a credit tradeline will improve your credit. Some of the reasons it might not are:
Purchasing and renting credit tradelines can be costly, ranging from $150 to $4,000. The purchase price is typically dependent on the account’s age and the credit limit. Buying into an older account with a higher credit limit is expensive because it has the most potential to impact your score positively.
It might be beneficial to stop and ask yourself if this money could be better spent elsewhere. You could use it to pay down your debt or open a secured credit card. The return-on-investment on purchasing credit tradelines is questionable considering you might spend a lot of money and then see nothing in return for it.
Buying credit tradelines is a legally gray area, but it’s clear the top institutions don’t approve of this process. Some think that buying credit tradelines could be considered bank fraud.
The Federal Trade Commission doesn’t approve it either. In 2020, the FTC went after a Denver company that sold credit tradelines with authorized user access. The FTC filed a lawsuit that alleges the company “violated the Credit Repair Organizations Act by the misleading use of tradelines and by engaging in a course of business that results in fraud or deception.”
By engaging in this activity, you may be opening yourself up to legal consequences.
Luckily, you don’t have to spend money to be added to a stranger’s account. There are other options available to improve your credit score.
Prioritize paying down your credit card balances. This will help your payment history and credit utilization ratio, which together make up 65 percent of your credit score. Take the money you were planning to purchase a credit tradeline with and apply it to your existing debt instead.
People with thin or nonexistent credit profiles can turn to alternative credit reporting. Alternative credit collects data not typically included in credit reports, such as rent, utility and phone payments. This lets you build your credit score through bills you already have. Popular apps for alternative credit reporting include IE, Experian Boost® and ExtraCredit.
You can open a new credit card and start working on building your own credit. There are credit cards specifically for people with low credit scores. If you don’t qualify for any traditional credit cards, you could also consider applying for a secured credit card instead.
Your credit can open up many doors for you. It can help you get approved for loans and accounts with better terms and lower interest rates. Additionally, a strong credit score can even help you when applying for jobs or apartment leases.
If your credit is struggling and you don’t know why, consider using the professionals at CreditRepair.com. Our credit consultants will review your report for any mistakes and file disputes on your behalf with the credit bureaus. CreditRepair.com believes every consumer deserves a credit report that accurately depicts them, and we’re here to help make sure that happens.
