Credit Tradelines: Everything You Need to Know

What is a Credit Tradeline?

A credit tradeline is any credit account that shows up on your credit report, such as a credit card account or a student loan. These tradelines can have multiple “authorized users”, or other people on the account that may be helping pay. On your credit report, these tradelines provide information about your lender as well as data about what you borrowed from the financial institution. When looking to take out debt, your issuer will look at tradelines to decide if they want to lend to you or not.

What are Credit Tradelines on your Credit Report

Your credit tradelines are basically your credit history. They consist of any loans or lines of credit you’ve taken out. These show up on your credit profile report and have lots of information for you and potential lenders to look at. Together, the information on your credit tradelines makes up your credit score. If the information on the tradelines shows that you have not been paying back your debt correctly, you will get a lower credit score and vice versa. Let’s take a look at some of the information on credit tradelines so you can get more familiar with them.

• Lender’s Name and Address: Each authorized tradeline tells exactly where you took debt out from. This way, if your next lender has any questions about you they can reach out to your past lenders. 
• Type of Account: The specific type of credit line or loan you acquired is listed here. This could be anything from your credit card or auto loan. 
• Partial Account Number: Account numbers are displayed on tradelines to verify the account, but only part of the account number is shown in order to limit fraud if someone were able to get a hold of your report. Note: You can call the credit bureau to get your full account number or you can receive it by paper. 
• Date the Account Was Opened: This date is shown to give more context to a lender. A seasoned tradeline from 25 years ago is not as informing of your repaying ability that one from 2 years ago would be. 
• Date the Account Was Closed: Likewise, this date is shown so the lender can see if the account is still ongoing or not. 
• Current Payment Status: Current status refers to the standing of the personal loan or credit account. If you have an outstanding payment that is late, your current status will show this. If you are all caught up on your payments, your current status will be in good standing. Your next lender could look at your current loans to see how well you are performing with them. 
• Current Balance: The amount you still have to pay on your specific account will show up. Your lender might look at this to see how much other debt you have. If you have multiple trendlines with large current balances, your next lender might be skeptical that you will be focused on paying their debt back first instead of the other balances you have.  
• Original Loan Amount or Credit Limit: This shows exactly how much debt you took on initially. If your primary tradeline shows you successfully paid off a large loan, your lender will be more comfortable lending you more money. 
• Monthly Payment: Your monthly payments show your lender how much you are typically paying in a month. 
• Recent Balance (credit cards only): If the tradeline is for a credit card, your current balance on that credit card will be shown.
• Payment History: The record of your payments you’ve made for the tradeline will be shown. Both your successful and missed payments will both be shown here. 

3 Types of Tradelines

If you care about your credit, you need to start paying attention to the credit bureaus’ tradelines to build your credit score. Each of your open credit accounts is tied to a separate tradeline and there are three main types of tradelines described below. 

• Revolving accounts: Credit cards are the best example of a revolving account tradeline. They’re called ‘revolving’ because they’re fluid as your credit changes depending on your balance, purchases, and payments 
• Installment loans: Mortgages, auto loans, and student loans are the best examples of installment loans. An installment loan is when you borrow a set amount of money and you repay that money on fixed terms
• Open accounts: An example of an open account is a business that sells products or services and doesn’t expect the buyer to pay until they receive the product or service. Individuals typically don’t deal with open accounts and businesses that buy goods using open accounts tend to have high creditworthiness

What Are Tradelines Used For?

Lenders Making Decisions About Your Credit

As you can see, tradelines are full of information. Each tradeline provides a ton of things for you and your lender to look at. While this information might not be so helpful to you, it's essential for someone that is potentially lending you money. Everything on your trendlines helps to form your credit score, which lenders can look at easily. If they choose to look deeper, they have everything they need on you to make a decision whether to lend to you or not. 

Needless to say, lenders will be more skeptical about someone with poor tradeline data. On the other hand, positive marks across your trendlines will allow you to get larger loans with more ease. Something else the lenders will consider is how many tradelines you have. If you have too many it can look like you are taking out too much credit. It can show that you are in over your head and that giving you another loan might not be a great idea. If you have too few tradelines it tells the lender you don’t have as much experience with debt that your lender would like you to have. 

Building Up Credit for Friends / Family

While lenders mostly use tradelines, they can still serve a purpose for everyday people. Tradelines don’t need to be attached to just one person. Certain tradelines like your credit card account can have multiple “authorized users”. These authorized users could be your family members or your friends. For example, an authorized user for a credit card account can make purchases on the credit card along with the person who owns the account. While you can still help pay, you are not primarily held responsible for payments. 

If you are an authorized user on a credit account that always makes its payments, you will reap the benefits of it. Your credit can improve without you even paying a dime. This is why about 33% of Americans have authorized user tradelines on their credit according to The Federal Reserve. Many parents will add their young children as authorized users on their credit accounts. If the parents successfully make payments until the child is old enough to have a credit card, they will have 10+ years of good credit. Their credit score will be high and their report will show a history of payments made on time. Many people also become authorized users on an account with good standing so they can help build their poor credit. 

Does this sound too good to be true? What’s the catch here? The ability to have your credit built up by seemingly doing nothing seems like a sketchy loophole, right? In reality, the practice of having authorized users on tradelines is not exactly black and white in terms of the law. Having friends and authorized users on your tradelines is usually perfectly fine. However, some people try to “buy” tradelines as well as be connected to a good tradeline account by a third party. This practice is also referred to as “piggybacking” or “renting” tradelines. This is much more of a grey area which we will discuss later. 

What Happens If You Are Removed From a Tradeline?

As the main credit account owner, if you remove someone as an authorized user, you won’t be affected. However, if you are an authorized user on someone else’s account and you are removed, a few things could happen. As a rule of thumb, the tradeline you were on will eventually disappear. The state of the tradeline when you leave depends on how long it stays on your credit. 

If you were on an account in good standing that closed, your tradeline will still show for some time. A credit reporting agency like Experian has differing policies when it comes to keeping these good tradelines on your account. Some credit bureaus will keep it on longer than others, but, they go away after some time. On the other hand, if you were on a poor credit account the negative tradeline will stay on your credit for a long time. An account with missed payments, defaults, penalties or even bankruptcies linger for some time. They can be on your account anywhere from 7 to 10 years!

How Buying Tradelines Work

Some people may not have access to a good tradeline they can become an authorized user on. They might not have friends or family with good credit or they want to skip the long process entirely. These people might try to skip a few steps and still have access to good credit. One such strategy is buying tradelines or “renting” them. With this, people try to become an authorized user on a random person’s account by being connected with them via a tradeline company or by buying access to their tradeline. This practice is much more frowned upon than being a normal authorized user on a friend or family’s tradeline. Let’s look deeper into this. 

Is it Illegal?

Buying tradelines falls into a very grey area of the law. Becoming an authorized user on a tradeline in of itself isn’t illegal. However, being an authorized user on a random individual’s account leans more towards breaking the law. Why’s this? Well, if you have bad credit and you pay money to have your credit look good, you are basically trying to deceive your potential lenders. This can be considered fraud in court and you could be charged with it depending on your situation. Consult your lawyer in more detail about buying tradelines.

If buying tradelines is generally a bad practice, why are there tradeline companies? Why can tradeline businesses operate within the scope of the law? What gives? Here’s what the Federal Trade Commission has to say about this practice. 

How is Buying Tradelines Different From Becoming a Traditional Authorized User?

When you are a traditional authorized user on a friend or family member’s credit account you likely have a close relationship with that person. But how is it that a loophole exists where close friends or family can reap the benefits of getting good credit by doing nothing? While there is not exactly a clear answer to this, it could be that it's implied that a friend or family member might aid you in paying your credit accounts. Likewise, having authorized users might be a way to help improve the credit of people with no other options to improve it. 

Regardless of why having traditional authorized users is accepted, buying tradelines are seen as cutting corners. Doing so allows you to have unfair access to good credit as a way to trick your lenders. 

Again, consult your lawyer in more detail about why buying tradelines can potentially be fraudulent. 

How Much Do Tradelines Cost?

There are many good reasons to buy personal tradelines and tradelines tend to cost between $100 to $1,500. 

Individual tradelines can also be grouped together for bigger tradeline packages that can improve credit scores more quickly. The cost you pay for a tradeline will come down to two main factors, (1) the age of the tradeline account and (2) the credit limit.  

Tradelines with a long history and larger credit limit will have a bigger impact on improving your credit score. Tradelines for credit cards over two years old are called “seasoned tradelines” and are more popular purchases. 
Low-cost tradelines will tend to be newer and have a minimal credit limit. Always do your research before making a tradeline acquisition.

Alternatives to Improving Your Credit Score Fast

Being an authorized user on a family or friend’s tradeline is an effective way to build credit over time. However, if you need your credit score to improve quickly, this may not be the best option. On the other hand, buying tradelines is fast but it is also potentially illegal. Let’s look at some other options to build your credit quickly. 

Pay Down Your Debt

Debts that are still not paid off is one of the biggest factors for a bad credit score. It is very hard to build good credit if you are still in a hole. Just think about it: why should a lender lend you money if you still owe money to other lenders? Paying off debt like your credit card will put your credit back in good standing and will put you on the right track to building your credit. 

Focus on Developing Good Credit Habit

If you have bad credit, there may be many things wrong that are hurting your score. Handling your debt can be very difficult and overwhelming at times. Here is a great article on good habits you can develop to help you improve your credit score quickly. 

A Loan at Possible Finance

At Possible, we offer both payday loan alternatives  as well as installment loans. You do not need good credit to have access to these loans. Likewise, we are not like traditional payday lenders. We want to serve our customers and help them build their credit. Unlike many other lenders, paying back our loans actually builds your credit. Our loans are smaller and are repaid sooner so that you can build your credit faster. If you end up struggling to pay, you can extend your deadline up to 29 days in our app. Loans at Possible are a fast and effective alternative to becoming an authorized user on tradelines. 

Think you want a loan from Possible? Download our app today and get started!