The 3 Types of Tradelines in Credit

Types of Tradelines

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There are many types of tradelines that appear on your credit reports. A credit tradeline consists of any account you have with a lender or service provider. This can include credit cards, loans, and utility payments.

Managing these tradelines well contributes to good credit. So if you have bad credit, taking a hard look at the type of tradelines you have and how to improve them can put you on the path towards a good credit score. 

Types of Tradelines

Any account that appears on your credit reports is a tradeline. 

Not all credit tradelines are weighed the same for scoring calculations, and not all tradelines report the same information. 

Additional information can appear on your credit report that is not considered a tradeline. This includes collections, credit inquiries, bankruptcies, etc.

In general, there are three main types of tradelines. Below, we will explore what they are and how they impact your credit.

1. Revolving Accounts 

A revolving tradeline consists of any type of revolving account. This includes secured credit cards, unsecured credit cards, and other lines of credit (eg, traditional bank lines of credit, PayPal Credit, etc.).

Each revolving account reports key information that impacts your credit. 

  1. Account opening date: impacts the length of credit history
  2. Payment history: affects the payment history portion of your score
  3. Credit limit: used to calculate available credit
  4. Balance: key for calculating your credit utilization

One of the unique features of revolving accounts is credit utilization. This is calculated by comparing your balance to your credit limit. This calculation impacts the amounts owed portion of your credit score. 

It is worth noting that some revolving accounts, i.e., credit building debit cards, don’t always report a credit limit, meaning they won’t affect credit utilization.

2. Installment Loans

An installment tradeline consists of any type of installment loan. This can include:

  • Credit builder loans
  • Auto loans
  • Mortgages
  • Student loans
  • Personal loans

Common types of loans that aren’t reported include title loans and payday loans. 

An installment tradeline reports set information that can impact your score in multiple ways: 

  1. Account opening date: impacts the length of credit history
  2. Payment history: affects the payment history portion of your score
  3. Original loan amount and current balance: impact the amounts owed part of your score 

Installment credit lines are also a key factor in the credit mix portion of your score. To achieve the best score, you need a mix of revolving and installment tradelines. 

3. Other

Most credit tradelines fall under the installment or revolving tradeline umbrellas, but there are a few additional tradelines that can appear on your credit. 

Rental history is one. Rent payments aren’t usually added to your credit reports, but some landlords offer this service. Additionally, many third party companies will report your rent payments for a small fee. 

Utility payments are another potential tradeline. But, again, these usually only get added to your reports if you use a third party reporting service. The exception is Experian Boost, which will report utilities and other tradelines like internet and streaming services. 

These other types of tradelines will impact your credit in two key ways; length of credit history and payment history. However, they do not impact the amount owed portion of your credit score.

Primary Tradelines vs. Authorized User Accounts

A primary tradeline is an account in your name, meaning that you opened the account. This can include accounts you open as a joint account holder or a cosigner. 

Authorized user accounts are ones where you are added as a non-fiscally responsible user to someone else’s account. Non-fiscal means that you can charge on the account, but you are not liable for repayment. 

Becoming an authorized user is limited to credit cards. 

In addition to how these two different types of tradelines work, there is a big difference in how they report to the credit bureaus and how they can affect your score.

Primary accounts:

  1. Are weighted more heavily
  2. Impact all aspects of your credit
  3. Are always included in credit score calculations

Authorized user accounts:

  1. Are not weighted as heavily
  2. Often only impact payment history, credit utilization, and length of credit history
  3. Are sometimes excluded in credit score calculations

It is also worth noting that closing primary tradelines will, in most cases, have a bigger impact on your credit score than closing authorized user tradelines. 

Are Authorized User Accounts Legal?

Becoming an authorized user on someone else’s account is perfectly legal. 

This action is most often taken on behalf of children or spouses, usually as a way to help them build credit or to give them a payment method to use in emergencies. 

Still, anyone can become an authorized user. For example, a parent, sibling, or even a friend can be added as an authorized user. You can often even have multiple authorized users on one account. 

Before adding an authorized user, you must check with your credit card issuer. Some credit card companies have specific limitations and requirements, including:

  • A minimum age for authorized users
  • A limit on the number of authorized users
  • They must live in the same household
  • A fee for adding an authorized user 

Unfortunately, authorized user accounts are abused. For example, in a practice called credit piggybacking, a person actually purchases an authorized user slot on someone else’s credit card.

While there is nothing illegal about selling tradelines, it is frowned upon. It often violates a credit card’s terms of service, resulting in account closure and is considered fraud. Newer FICO scoring models exclude these accounts from credit score calculations.

What are Seasoned Tradelines? 

A seasoned tradeline is an authorized user account that is old. The older, the better. These seasoned tradelines also usually have higher than normal credit limits. i.e. $10,000 versus $500. 

The term “seasoned tradeline” is most often used in the world of credit repair and buying tradelines. So if you hear the phrase, be on your guard. Someone is likely trying to sell you an authorized tradeline. 

And while the practice is not illegal, like any ‘quick fix’ solution, the impact on your credit score will be short-lived and not worth the price.

How Tradelines Affect Your Credit

Tradelines impact all aspects of your credit. 

For example, the length of credit history is calculated by determining your average age of accounts. So the longer you keep your accounts open, the better your length of credit history. And if you pay them on time, this will have a positive impact on your payment history. 

On the other hand, if you miss a payment on a credit tradeline, this will negatively impact your payment history. And it can be challenging to recover your score after only one late payment. 

Closing the account won’t help either. Once closed, an account loses its impact on amounts owed, length of credit history, and credit mix, but it retains the ability to impact the payment history portion of your score. 

The late payment will be removed from your credit report when seven years have passed since the initial delinquency date. 

Keeping the balances low on your revolving accounts will benefit your credit utilization. And credit utilization is a huge factor in the amounts owed portion of your score.

Having tradelines of different types such as revolving and installment improves your credit mix. And opening new tradelines is the primary factor that affects the new credit portion of your score. 

How Do I Know What Tradelines to Buy?

Buying tradelines doesn’t have to be complicated. Stay away from buying authorized user tradelines; these are shady and only improve your credit scores for a limited amount of time. 

Instead, consider purchasing tradelines that are primary accounts. For example, credit accounts like credit builder loans and secured credit cards that require a small initial investment. 

Below are five of Digital Honey’s preferred vendors for adding safe, legal, and effective credit tradelines to your credit report. 

CreditStrong

CreditStrong offers an installment tradeline that even those with bad credit can qualify for. 

During the application process, there is no hard inquiry because the loan is secured. Instead, you simply choose the type of loan you want (credit builder versus savings builder) and the level of payment you can afford. 

CreditStrong has loans starting with as little as a $15 a month commitment.

Once you are approved for a loan, the loan funds are locked away in a savings account, and as you make payments, you unlock a portion of that account. 

For instance, with their three year Build and Save loan, your monthly commitment is $38. After three months of making payments, you’ll have unlocked $1,100 of your loan funds though those funds are not released until the account is closed. 

Try CreditStrong

Self Credit Builder Loan & Visa

Self Financial offers two types of tradelines, an installment loan and a revolving tradeline. 

Both products are designed for those with poor credit and are secured products. 

The credit builder loan starts with as little as a $25/month commitment and goes up to $150/month. For the smaller loan, you will pay $600, and at the end of your two year loan term, you’ll get back $520. 

The secured credit card is linked to your credit builder loan, and the security deposit is transferred from the unlocked portion of your loan account. 

For instance, if you have made over $300 in loan payments, you could transfer up to $300 to your secured credit card. The $300 would be the credit limit for the card.

Try Self

Extra

Extra offers a debit card that reports to your credit like a revolving tradeline. 

You use the card to pay for purchases like you would with a credit card. Extra covers the purchase and automatically deducts the payment from your linked checking account by the next business day. 

Then, at the end of the month, Extra reports your purchases as payment activity on your revolving tradeline. 

Extra has no credit check; instead, when you link it to your checking account, they will evaluate your spending habits. Then they assign you a credit limit called your “Spending Power”.

Extra offers this credit reporting debit card for a monthly subscription fee of $7.

Try Extra

BoomPay

Boom offers a different kind of a tradeline, a rental tradeline. A rental tradeline is one where your rent payment history is reported, up to two years worth. 

This particular tradeline will not impact the credit mix, amounts owed, or new credit portion of your score. The only factors influenced are payment history and length of credit history. That said, not all credit models include rent tradelines in score calculations.

BoomPay’s BoomReport service costs $2 a month for ongoing rent reporting and a one-time fee of $25 for reporting two years of past payment history.

Try BoomPay

Experian Boost

The Boost tool by Experian offers to add unique utility tradelines to your credit report. This is credit history for paying your utility bills on time. 

Just like with rent tradelines, utility tradelines will only influence your payment history and length of credit history. And these tradelines may or may not be used in credit score calculations. 

The upside to the Boost service is that they will not add negative information to your credit report. So if you were late on a utility payment or two, this would not be reported. And you can remove these utilities from your credit history at any time.

The Boost tool is 100% free, and it comes with a free credit report and FICO Score from Experian. 

Try Experian

Conclusion

A single credit tradeline from a lender can significantly impact your credit score. Managing your tradelines poorly will result in bad credit, and managing them well will lead to good credit. 

If you are stuck on the bad credit side, there are credit repair steps that you can take to improve your credit.

You can open a new tradeline with a lender and work on fixing any issues with your existing tradelines. Credit repair done right is not a quick fix; it is a lasting credit improvement solution.

Read the other articles in our tradeline series:

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