A tradeline is the term used by the three major credit reporting bureaus — Equifax, Experian, and TransUnion — to describe any one of the accounts listed on your credit report. Each account has its own tradeline, and each tradeline contains information about the creditor, your account, and your debt.
Tradelines make up a good portion of your credit report, which means the information within them plays a big role in determining your credit score. And, as you probably know, your credit score is an important number that can prove your creditworthiness and help you snag lower rates on loans, among other benefits.
The more you understand about what a tradeline is and what creditors see when they read your credit report, the better equipped you’ll be to use that information to maintain the best credit score possible.
So to help you with that pursuit, let’s look at:
• What a credit tradeline is and how it works
• What information is reported by your creditors
• How tradelines can impact your credit and banking
• The risks and rewards of buying tradelines
• Alternatives to credit tradelines
What Is a Credit Tradeline?
If you’re wondering, “What is a credit tradeline?” you are probably not alone. It’s not an everyday personal finance term. So let’s define it: A tradeline in a credit report is a record for each of the credit accounts that you have. This includes revolving credit accounts, such as credit cards, and installments loans, such as student loans, auto loans, mortgages, and personal loans.
Each tradeline may contain a host of information reported by the creditor about themselves and your debt.
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What Information Is Reported by a Creditor?
When it comes to knowing what a tradeline is on a credit report, you may be surprised by just how much intel is shared. Quite a lot of information is reported about a creditor and your debt. The list includes:
• Creditor’s name and address
• Type of account
• Partial account number
• Date the account was opened
• The account’s current status
• Date of latest activity
• Original loan amount
• Credit limit
• Current or recent balance
• Monthly payment
• Payment history
• Date the account was closed, if this situation applies
By looking at a tradeline, you can view all of the most recent information reported by your creditors to the three credit reporting bureaus, all in one place. This is the information that will have an impact on your credit score.
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What Other Information Is Gathered by the Credit Bureaus?
In addition to the information listed above, the credit reporting bureaus will also gather:
• Personal information, including your name, date of birth, Social Security number, home address, phone number and employer
• Information from the public record, including bankruptcies
• Who has made recent inquiries about your credit and when (for example, if you’ve applied for new credit and a hard inquiry has been made)
The credit bureaus don’t know everything about you, however. They don’t have access to information such as your income, bank account balances, or marital status, though the report could include a spouse’s name if a creditor reports it.
How a Credit Tradeline Works
Tradelines are like the heartbeat of your credit report. Without them, you can’t have a score. If you are keeping your credit utilization low (that is, keeping your balance low vs. your limit on credit cards), paying your bills on time, and showing that you are a dependable borrower, your tradelines will be positive. Your three-digit credit-score number will be in good shape.
If, on the other hand, you pay your bills late, skip payments, and rack up loads of debt, your tradelines will reveal negative information. Your score is likely to be low or decline.
What Are Tradelines for Credit Used for?
So now you understand that your credit score is calculated based on the information provided in your tradelines. Let’s take it a step further in terms of how tradelines for credit are used.
Creditors use your score to help them determine whether or not to extend credit to you and what terms and interest rates they’re willing to offer. Good credit is important. For example, if you have a good credit score, your lender may see you as less of a risk and offer a lower interest rate on a loan. Higher risk loan applicants with lower scores may be offered much higher rates. In other words, buying a car or home will be that much more expensive if your score is low.
While your credit score gives lenders an overall sense of the shape of your personal finances and credit history, it doesn’t give them any details. For those, they may look at individual tradelines contained within your credit report.
How Tradelines May Affect Your Credit and Banking
Your tradelines have a direct impact on your credit, since activity within the account is used to calculate your credit score.
Here’s a closer look at the five factors used to generate your FICO score, and the weightings used for each.
• Payment history: 35%
• Amounts owed: 30%
• Length of credit history: 15%
• New credit: 10%
• Credit mix: 10%.
Any credit activity that pertains to one of those categories can have an impact on your score when reported in your tradeline. For example, delinquent payments could damage your credit history. Or closing an account may have an impact on your length of credit history.
When Are Credit Tradelines Removed?
From time to time, a tradeline can be removed from your credit report. For example, if you’re an authorized user of a credit card and you are removed from the account, the tradeline will be dropped from your credit report in about two months.
When you close an account, the tradeline isn’t removed immediately. In fact, if that account has a positive impact on your credit score, the tradeline may stay on your report for as long as 10 years. Nice!
Worth noting: If a tradeline was opened fraudulently — someone opened a credit line or took on a loan in your name without your knowledge — you may ask to have the tradeline removed. In fact, it can be a very good idea to do so. It can help boost your credit score since many fraudulent accounts contain negative credit information.
What Happens to Your Banking When a Tradeline Is Removed?
Removing a tradeline can be a positive or negative thing for your credit. If the tradeline was associated with positive information, removing it can hurt your credit. Luckily, a positive closed account stays on your report for a decade.
Closing an account with negative information can be a plus for your credit score. If an account is delinquent when it’s closed, the entire account will be removed after seven years.
How Is This Information Collected?
Creditors report the information collected in the tradelines to the credit reporting bureaus. They do so voluntarily, at their discretion, and on their own timeline, though the credit bureaus prefer that credit information is updated every month.
Each credit bureau may use different sourcing for the information they gather. What’s more, while some creditors will report to all three bureaus, some may only report to two, one, or even none of them.
Why You Should Check for Errors
As we’ve mentioned above, your tradelines are the source of information that determines your credit score. So it’s important to check your credit report regularly to make sure that there are no errors negatively impacting your score. Inaccurate information could also be a sign of identity theft.
You can request one free credit report from each of the three major credit reporting bureaus each year, according to the Fair and Accurate Credit Transactions Act. Since you can get three reports each year, you could even request one report every four months, to help ensure your finances are as up-to-date as possible. A popular site to check your credit report is Annualcreditreport.com .
You may also consider signing up with a credit score monitoring service.
Can You Buy New Tradelines?
Some companies will offer the opportunity to buy tradelines to boost your score. It’s not necessarily advisable to purchase from these third-party services.
Here’s how they work. First, a little background info: When you’re trying to build credit, one common strategy is to become an authorized user on an already existing account. For example, your parents might make you a user on their credit card. Good credit history and maintaining a low balance on this account could help you build credit.
When you purchase a tradeline, you enter into a similar agreement with a stranger. You’ll pay a third-party service to set up the transaction. You won’t know the person whose account you’re joining, and you will not be able to use the account. The account will usually remain open to you for a short period of time only.
You are paying for the privilege of being on this account, which will supposedly help raise your credit rating.
Is Buying Tradelines Legal?
Technically speaking, buying tradelines through a reliable tradeline service is legal. Congress has said that under the Equal Credit Opportunity Act, authorized users cannot be denied on existing credit accounts, even if the person being authorized is a stranger.
That said, there are times when working with a tradeline service can lead to serious issues.
For example, a company may say you can hide bad credit or a bankruptcy using a credit privacy number. In reality, this might be someone else’s Social Security number, landing you in the middle of an identity theft scam.
You might also find yourself buying into an account that’s gone into default. You could end up as the primary owner of the account, which could hurt your credit.
Also, watch out for companies that use a process called address merging in which the company claims the authorized user (that would be you) lives at the same address as the account holder. This is fraudulent, and it indicates that you are not working with a reliable company.
Risks of Buying Credit Tradelines
Whenever you give out your personal information, including to a tradeline supplier, you are putting yourself at risk of identity theft.
By attempting to take a shortcut to build credit, you also won’t be doing yourself any favors. Beyond the risk of identity theft and other entanglements, you’ll be robbing yourself of the chance to build good financial habits. And this could come back to bite you in the end if you never learn to manage debt responsibly on your own.
How Banking Can Improve Your Credit Report
If you’re looking to improve your credit score, there are a number of alternatives to buying tradelines that you can pursue.
• Always pay your bills on time. Your payment history makes up the bulk of your credit score. Pay close attention to your checking account and bills; make sure you can and do make regular debt payments on time and in full. Consider automated bill pay to help ensure you never miss a payment.
• Pay down debts. Your available credit plays a large role in the calculation of your credit score. Your credit card utilization ratio, as we mentioned above, shows how much or your available credit you’re using. You can calculate your ratio by dividing credit card balance by loan limit. If your utilization rate is over 30%, improve your credit score by paying down your balance. Aim to keep your score at under 10%.
• Check your credit reports regularly. Learn to read your credit report. Alert the credit bureaus to any inaccuracies. Your credit score should change for the better shortly after a mistake is corrected.
Alternatives to Credit Tradelines
If you’re trying to build credit over time, there are also alternatives to tradelines.
• Become an authorized user. You may wonder, “Isn’t this what purchasing a tradeline is?” The answer is yes, but it’s far better to become an authorized user on the account of someone you know well or are related to. You’ll have the opportunity to use the account and learn healthy credit habits. Just don’t abuse this privilege.
• Apply for a secured credit card. Secured credit cards require you to make a security deposit to receive a line of credit. This deposit often becomes your credit limit. These cards are easier for people with no credit history to qualify for, and they help you build credit.
• Get credit for paying bills. You might look into services that allow you to get credit for on-time payment of bills that usually don’t count towards your credit score. This may include bills for everything from your utilities to your streaming service.
The tradeline for each of your revolving credit or installment accounts contains all the information necessary to generate your credit score. Understanding your tradelines can help you understand the ways in which you can boost your score. Manage those tradelines well, and you may unlock lower interest rates on loans and other elements of financial health.
Here’s another way to boost your financial health: by banking with SoFi. Our linked Checking and Savings accounts, when opened with direct deposit, earn you a top-notch APY so your money grows faster. And we don’t cut into those earnings with fees, either. We won’t charge you monthly, minimum-balance, or overdraft (up to $50) fees.
Are tradelines good for credit?
The information contained with your tradelines is used to generate your credit score. It reflects how well you manage credit and can therefore be either good or bad, depending on whether you have been paying back debt on time and how much debt you are carrying.
How much will a tradeline boost my credit?
Adding a tradeline can actually lower your credit in the short-term. For example, it will lower the average age of your accounts, which can have a negative impact on your length of credit history. However, if you can maintain the account over the long-term and keep up with payments, the new account may provide a boost to your credit score.
How do I get tradelines on my credit?
Tradelines are added to your credit report when you open new lines of credit or take out new loans. A tradeline is also added when you become an authorized user on another person’s account.
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