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A tradeline is a listing on a credit report that appears after opening a loan, credit card, or other account. The major credit reporting bureaus include Equifax, Experian, and TransUnion.
Each tradeline represents a component of a consumer’s full credit history (profile). FICO and VantageScore use tradeline data when calculating consumer credit scores.
What Are Tradelines On A Credit Report?
Consumers without any tradelines lack credit histories. Thus insufficient data exists for calculating a credit score. For this reason, it’s important to recognize the importance of adding tradelines to build credit.
Tradelines should post to all credit reports within 15 to 45 days after opening new accounts. While most major lenders report to all three of the major credit bureaus, some might only report to one or two.
Tradelines should initially list any key information including the lender, type of account, any credit limits, and more.
After appearing on the credit report, lenders regularly update account activity. Common entry updates include the payment history and current account balances.
Tradelines are vital for developing good credit, but they can also have a negative impact. For example, having a late payment on a credit card, missing a car payment, or debt collection efforts can severely hurt your credit score.
Credit scores are a three-digit number ranging from 300 to a perfect score of 850. FICO is the most widely-used credit scoring model; yet, VantageScore is also used to an extent.
A tradeline associated with a closed account will remain on a credit report for a 7 to 10 year period.
Errors are commonly found in the tradeline data reported by the major credit bureaus, which can hinder a credit score. Consumers should check their credit reports at least once each year for any such errors.
What Are The Components Of A Tradeline?
Equifax, Experian, and TransUnion each maintain independent credit reports for consumers. Based on the tradeline data that each bureau receives, the reports may vary.
Credit reports are usually composed of six sections or categories:
- The personal information of the consumer
- Employer information
- Statements involving the consumer (such as record disputes)
- Account information (tradelines)
- Public records (such as foreclosures, bankruptcies, or tax liens)
- Credit inquiry history (credit checks performed by prospective lenders)
Some of the most common components found in a tradeline include the following:
- The name and contact information for the creditor and the lender.
- Unique identifiers such as account numbers. (May be partial or redacted for security reasons.)
- The type of account and status (current or delinquent)
- Dates include when accounts open or close.
- Original loan amounts, credit limits, or current balances
- The account’s payment history
- Account responsibility. (May include details such as if the consumer is an authorized user rather than a primary card or account holder.)
What Are The Different Types Of Tradelines?
A variety of different types of tradelines exist. Two of the most common tradelines include revolving and installment credit accounts.
With revolving credit accounts, borrowers can repeatedly buy goods or services and repay the balance. Revolving accounts allow for ongoing borrowing and repaying up to a set limit.
The most common types of revolving accounts are credit cards and home equity lines of credit (HELOCs). The possible issuers of revolving accounts include banks, credit unions, and retailers.
Borrowers and lenders engaging in revolving credit generally maintain an ongoing financial relationship.
Credit cards are a widely accepted form of payment, particularly for most online or phone transactions.
HELOCs are revolving lines of secured credit available for homeowners. HELOCs usually finance large expenses such as home improvements or are used for consolidating other debts.
Revolving credit accounts typically offer flexible repayment terms. Borrowers may choose to pay the full balance or make a series of payments.
Installment accounts involve borrowing a lump sum for a single large purchase. The most common examples include home mortgages and auto loans. Installment accounts generally have a predetermined, fixed repayment schedule that is often monthly.
Utilities are also considered a tradeline. They consist of gas, electricity, etc.
All three credit bureaus today will include rent payment history in credit reports. FICO 9, FICO 10, and some VantageScore models now will consider rent in their calculations.
Various third-party reporting services now assist consumers seeking rental tradelines. Many of these services also can report utility bills and other monthly expenses.
What Are Examples Of Tradelines?
The term “primary tradelines” refers to any account that the consumer opens in their own name. Examples include credit cards, loans, and other accounts.
Primary tradelines are distinct from authorized user tradelines. Authorized user tradelines are often called “piggybacking” tradelines.
Credit cards have traditionally permitted cardholders to name authorized users for their accounts. This is commonly used for the spouse or children of the account holder.
Authorized users may use the credit card only for purchases. The primary cardholder on the account legally retains sole responsibility for paying any balance.
“Piggybacking” also may represent a means of improving one’s credit score. This occurs because the credit card company begins reporting the account to the credit bureaus and it appears as a tradeline.
Some third-party organizations now sell authorized user tradelines. This occurs by facilitating a match between a cardholder and a consumer, a controversial practice that can be viewed as fraud.
Another primary tradeline option for improving credit is credit-builder loans. Financial organizations offer these variations of an installment loan.
Unlike a standard installment loan, the funds remain in a secured bank account for the full loan term. The borrower makes a fixed, monthly payment, which is then reported to the credit bureaus.
After making all loan payments, the borrower will access the funds held in the account.
Can You Buy Tradelines?
Consumers may obtain a free tradeline from traditional credit accounts. However, various organizations now sell tradelines, including authorized user tradelines.
Many agencies deem buying authorized user tradelines as deceptive. Although not technically an illegal practice, organizations such as Experian discourage it.
Experian explained that buying tradelines might represent a means of deceiving potential lenders. In extreme cases, they compare it to bank fraud.
The costs involved with buying tradelines vary based on the potential of how much a tradeline boosts your credit. Commonly advertised price ranges are from $150 up to $4,000.
Two key variables impact the price of buying an authorized user tradeline. These include the age of the cardholder account and the credit limit of the account.
Two of the factors FICO uses when calculating scores are the age of credit history and the credit utilization rate. The utilization rate is a percentage based on this formula:
Current Account Balance / Total (Max) Account Limit
The rule of thumb is that this percentage should remain below 30%. Thus, accounts with higher limits and low balances are sought after.
Credit card accounts older than two years are often called “seasoned” accounts. These also are more expensive.
Credit builder loans are a more legitimate means of improving credit. Like installment loans, credit builder loans have a set monthly payment and loan term.
The loans often range from $200 to $2,000 and range from 12 to 24 months. Rather than receiving the loan funds, the money remains in a secured account.
The lender will report all payment activity to the major credit bureaus. After making all payments, the secured account funds become available.
Can Tradelines Hurt Your Credit?
Yes. Tradelines within your credit report could hinder your credit in several different ways.
One example could occur if the primary cardholder removed you as an authorized user. This would represent a major concern if the authorized user tradeline was the only account on your credit report.
Removal as an authorized user might also harm your credit utilization rate. Consider the following example:
You have one primary credit card with a $500 balance and a $1,000 credit limit. You also are an authorized user on another credit card account with a $500 balance and a $2,000 balance.
These accounts have a combined $1,000 balance and a $3,000 credit limit, which translates to roughly a 33% rate. If the primary cardholder removed you as an authorized user, you have only your personal credit card remaining–and a 50% utilization rate.
For authorized user tradelines, the primary cardholder might begin missing payment due dates. Payment history is the largest single factor that influences a FICO score (35%).
With primary accounts, the same pitfalls could occur. One late payment that extends beyond 30 days can significantly lower your credit score.
How Long Do Tradelines Last?
For good or bad, tradelines remain visible on a consumer credit report for a while. Each tradeline will remain for at least seven years.
Consider the following facts:
- Open and active credit accounts will continue to remain on your credit report.
- Tradelines on closed accounts containing negative information generally remain for seven years. But, some forms of bankruptcy might remain for 10 years.
- Tradelines on closed accounts in “good standing” often remain for 10 years.
- An authorized user tradeline may or may not remain on your credit report depending on the specific lender or credit bureau involved.
Many different tradelines may appear on your credit report. Examples include credit cards, home mortgages, student loans, car loans, and more.
Consumers seeking to build credit should focus on responsibly managing all tradeline accounts. Paying all accounts on time is the most important factor.
Anthony Amodeo is a regular finance writer in both business-to-business and business-to-consumer industries. Particular areas of focus include personal finance, small business, real estate, and more. He is a graduate of Kent State University. His credit scores are top tier.