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If you’ve ever opened a line of credit (e.g., a credit card), then you have a tradeline. A tradeline is simply a record of your borrowing and repayment history with a lender. This information is reported to the credit bureaus, and it becomes part of your credit file. Read on to learn everything you need to know about tradelines.
What Is a Tradeline?
A tradeline is a credit account that’s been opened in your name and reported to the credit bureaus. The most common type of tradeline is a credit card account, but other types of tradelines include loans (auto loans, mortgages, personal loans) and lines of credit (home equity lines of credit).
Each tradeline will have its own credit limit and repayment terms. For example, a credit card may have a $5,000 credit limit and require you to make a minimum payment of 3% of your balance each month.
How Do Tradelines Impact Your Credit Score?
A tradeline will also have a credit history, which is a record of your borrowing and repayment activity over time. This information is reported to the credit bureaus (Experian, Equifax, and TransUnion) regularly, typically once a month.
Your credit history will include information such as your payment history (whether you’ve made your payments on time), credit utilization (how much of your available credit you’re using), and the age of the account (how long you’ve been using it).
This information helps to determine your credit score, a number that measures how trustworthy you are to lenders or creditors. A high score means you’re more likely to be approved for loans and lines of credit at lower interest rates.
Generally speaking, you’ll want to keep your credit utilization low (use less than 30% of your available credit) and make all of your payments on time to maintain a good credit score.
How to Boost Your Credit Using Tradelines
Adding tradelines to your credit report can be a great way to boost your credit score. That’s because adding positive information to your credit file (information that shows you’re a responsible borrower) can help offset negative information (information that shows you’re a high-risk borrower).
Conversely, having too few tradelines can actually hurt your credit score. A lack of credit history makes it difficult for lenders to assess your creditworthiness. As a result, you may be considered a high-risk borrower and be charged higher interest rates or be denied loans and lines of credit altogether.
Some credit bureaus offer programs that allow you to add positive tradelines to your credit file. For example, Experian Boost allows users to factor their phone and utility bills into their Experian credit score. Other tradeline companies offer programs that allow users to piggyback off of the credit history of another person.
What Do Tradeline Companies Do?
Around 16% of Americans have a low credit score (between 300 and 579). Bad credit can negatively impact your ability to get a loan, rent an apartment, or even land a job. If you need to take out a business loan with bad credit, it will be very difficult to do so.
Tradeline companies are companies that sell tradelines to people with bad credit as a way to improve their credit scores. Here’s how it works:
- A tradeline company will find people with good credit (i.e., a credit score of 720 or higher) and add them as an authorized users on one of their credit card accounts.
- The account will then show up on the authorized user’s credit report, and the authorized user’s good credit history will be reported to the credit bureaus.
- Over time, this can help to improve the authorized user’s credit score.
Tradelines can also be used to help people with bad credit establish a positive payment history. For example, if you have a bad credit score because you’ve never had a loan or line of credit before, then you can use a tradeline to get started.
In this case, the tradeline company will find someone with good credit who is willing to co-sign for a loan with you. The loan will then show up on your credit report, and your good payment history will be reported to the credit bureaus.
Are Tradelines Legal?
Yes, tradelines are legal. The practice of selling tradelines is regulated by the Federal Trade Commission (FTC), but there are no specific laws that prohibit the practice. However, some laws govern how tradelines can be used. For example, the Fair Credit Reporting Act (FCRA) requires that tradelines be reported accurately and completely. Additionally, the Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating against applicants based on their credit history.
What Are the Risks of Using Tradelines?
Some risks are associated with using tradelines, but these can be mitigated by working with one of the best tradeline companies. Here are some of the risks to be aware of:
- You could end up with a lower credit score: If the tradeline company you’re working with is not reputable, they may not report the tradeline to the credit bureaus accurately or on time. This could result in a lower credit score for you.
- You might accrue new debt: If you’re not careful, you could end up in debt if you max out the credit limit on the tradeline.
- You could be sued: If the primary account holder defaults on payments, you could be sued by the creditor. This is much rarer, but it’s still a possibility.
How to Find the Best Tradeline Companies
When looking for a reputable tradeline company, there are a few things you should keep in mind. First, make sure the company is registered with the Better Business Bureau (BBB). The BBB is a nonprofit organization that rates businesses based on customer satisfaction.
You can also check to see if the company has any complaints filed against them with the FTC. Finally, make sure the company offers a money-back guarantee. This will protect you in case the tradeline doesn’t work as advertised.
Endnote
Tradelines can be a helpful way to improve your credit score, but it’s important to do your research before working with a tradeline company. Make sure you understand the risks involved and only work with a reputable company that offers a money-back guarantee.
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