Tradeline Definition

A tradeline, according to the Consumer Finance Protection Bureau (CFPB), is information about a customer account that is sent monthly to a consumer reporting agency. A consumer reporting agency, also called a credit bureau, compiles the tradelines. Tradelines consist of data such as the account balance, payment history, and the account’s status. The account’s status shows whether it is current, past due, or charged-off.

What is a Tradeline?

Tradeline Process

Knowing how a tradeline works is helpful for a customer to have a better idea of reading a credit report. Reading a credit report helps the customer identify what the lenders or creditors see when they perform a credit check. A credit check contains different tradelines.

Tradelines record the information for each loan that is reported. This information includes all activities, including payments on that loan or credit line and other data such as the lenders' or creditors' information, customer’s information, type of loan or credit line, and terms of the loan or credit line.

Tradelines work when the information on a customer’s credit report is used to calculate a credit score. A credit score is a three-digit number that measures the creditworthiness of a customer. The creditworthiness of a customer is measured by the customer’s financial behavior. A customer’s financial behavior includes payment history and current balances on loans and credit cards.

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Tradeline On A Credit Report

A tradeline on a credit report is intended to assist the lenders or creditors. Lenders or creditors use a tradeline’s helpful information to minimize the risk of their lending or credit decisions. This helpful information usually includes the following:

  • Type of tradelines such as open account, installment loan, and revolving account
  • Current balance
  • Partial or scrambled account number
  • Original loan amount or credit limit for installment loans and credit cards, respectively
  • Payment status
  • Account responsibility
  • Minimum monthly payment
  • Date of last activity, including payments
  • Date the account was opened
  • Date the account was closed if applicable
  • Payment history
  • Recent balance for credit cards only
  • Name and address of the lender or creditor

The information in a customer’s tradeline on their credit report is used to calculate their credit score. A credit score is only generated if there is, within the previous six months, at least one active tradeline. Tradeline’s details are free to use by lenders or creditors to analyze a customer’s financial situation. A customer’s financial situation determines whether a credit application will be approved or denied. Credit applications are recorded in the customer’s credit report.

The customer’s credit report, according to CFBP, can be requested for free from any of the three major bureaus. The three major bureaus like Equifax, Experian, and TransUnion, can provide the credit report for free every 12 months. The credit report can be requested and reviewed in the following ways:

  • Online using the Annual Credit Report website
  • Phone through the hotline number provided
  • Mail by downloading and completing the Annual Credit Report Request form, mailing it to the Annual Credit Report Request S

The credit report request also needs identity verification. The identity verification keeps the customer’s account and information secure. Here is the information neede

  • Full Name
  • Address
  • Social Security Number (SSN)
  • Date of Birth
  • Security questions that only the customer knows

Types Of Tradelines

The types of tradelines classify any accounts that a customer is currently paying, open and closed accounts, and any joint accounts. These accounts or tradelines fall into three categories:

  • Installment loans are accounts that a customer borrowed at a fixed amount and repaid on a fixed timeline. These accounts are mortgages, auto loans, student loans, and personal loans.
  • Revolving accounts are accounts that are ongoing and continuous such as the balance, payments, and available credit. These accounts are credit cards and lines of credit.
  • Open accounts are accounts that are paid in full when the customer is paid by the buyer. These accounts are typically present in businesses.

Each type of tradelines contributes to a customer’s credit score. The customer credit score weighs each tradeline differently, like the Fair Isaac Corporation (FICO) score. The FICO® score is calculated into five categories:

  • Payment history accounts for 35% of the FICO® Score. This shows if the customer has paid past credit accounts on time. The lenders or creditors also use this to calculate the amount of risk when extending credit.
  • Amounts owed account for 30% of the FICO® Score. This reflects the credit accounts owned, including the debt owed on them.
  • Length of credit history accounts for 15% of the FICO® Score. This shows the length of credit accounts since they were established and used by the customer.
  • The credit mix accounts for 10% of the FICO® Score. This considers the mix of credit cards, retail accounts, mortgage loans, installment loans, and finance company accounts.
  • New credit accounts for 10% of the FICO® Score. The frequency of opening new credit accounts in a shorter period of time can have a greater risk for lenders or creditors.

Example Of A Tradeline

An example of a tradeline is a customer’s car payment history. The car payment history includes when the customer started repaying the car loan. The car loan repayment creates a tradeline. The tradeline summarizes the customer’s contact information, current payment status, the date the credit line was opened, and the date the credit line was closed. Other current information such as the date of last payment, remaining current balance, and monthly payment amount are also reported by the tradeline.

Other examples of tradelines are the following:

  • Mortgage loans
  • Credit cards
  • Lines of credit
  • Student loans
  • Personal loans
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How Do You Get A Tradeline?

A tradeline is automatically created when a customer starts a new line of credit. A new line of credit can be a new credit card. The new credit card’s purchases and repayments create a record of history that is included in the credit report of the customer.

The customer can also get a tradeline by asking a family member, like a parent or a spouse, to add the customer’s name as an authorized user (AU) to one of their credit card accounts. A credit card account that is in good standing, together with the customer as AU, can help the customer improve credit.

Credit bureaus also offer ways for customers to add tradelines like Experian Boost. Experian Boost is a free tool that allows a customer to connect the bank accounts used for paying bills. Bills like phone, utility bills, and internet streaming bills like Netflix, Hulu, Disney+, and HBO, are used to create a positive payment history. Positive payment history can result in a boost in the customer’s FICO® score.

Another way of getting a tradeline is through rent reporting services. Rent reporting services allow a customer to use rent payments as a tradeline to the credit report. A credit report that reflects good rental payment information can help boost the credit score of the customer. The customer must choose a rent reporting service that reports to all the three major credit reporting agencies.

Buying or renting tradelines, also known as credit piggybacking, is another way to get a tradeline. This way allows a customer to pay someone to add the customer as an AU. According to Nasdaq, there are several problems with buying tradelines:

  • The customer credit scores might not improve due to several reasons like:
    • Some credit card issuers do not report AU activity to credit bureaus.
    • The credit card company closes the account because of violations.
    • The primary account holder could handle the account poorly.
    • The new tradeline might not benefit the customer, unlike others.
    • The card account holder could remove the customer as AU.
    • Credit score creators could now detect it.
  • Buying tradelines can be expensive as payments for an AU range from $150 to $4000 based on the following:
    • The age of the account
    • The amount of credit limit
  • Credit piggybacking is a gray area for government agencies like the Federal Trade Commission (FTC), lenders, credit reporting agencies, and credit score creators.

Tradelines Timing

Tradelines last for seven years, according to the CFPB. CFPB states that consumer reporting agencies are required by law that after seven years, a customer’s account should be removed from most negative information. Negative information or any information that is older than seven years must be disputed by the customer to the consumer reporting agencies.

Consumer reporting agencies are not required to delete information regarding bankruptcies for ten years. Other information like civil suits, civil judgments, and records of arrests can stay beyond seven years or until the governing statute of limitations has expired, whichever is longer. Positive information on a customer’s account could remain on the credit report for up to 10 years.

Tradelines for fraudulent or incorrect reports can be disputed by the customer. The customer needs to provide valid proof to the credit reporting agencies. The credit reporting agencies review the dispute and will remove the tradelines after 30 days.

For more information on Tradelines contact the professionals at iSoftpull today.