Are you new to the tradeline industry? If you are, you are probably wondering how tradelines work. You may even be wondering what a tradeline is. This is normal, but you may be surprised to find out the use of tradelines is more common than you think, and they may even be able to help you raise your credit score. If you have never heard of tradelines, the following article will help you better understand what they are and how tradelines help your credit profile.
What is a Tradeline?
In short, the term “tradeline” refers to any credit account, in particular authorized user (AU) tradelines. AU tradelines, as their name implies, is simply a tradeline that belongs to a user who allows another user to position themselves on the account. In other words, when you purchase a tradeline, the original owner will allow you to add yourself to the account, reaping the benefits of their good credit profile. When you are designated as an authorized user, there is also no need to worry about any charges incurred on the account – you will not be held liable. The tradeline, however, can still affect your credit.
How Do Tradelines Work?
When a person is added as an authorized user to someone else’s tradeline, the complete history of the account is reflected in both users’ records, primarily because credit records don’t report the date an authorized user is added to an account. Simply put, as soon as you are added as an authorized user, your credit report will include the years of history associated with your new account. Parents often add their children to their credit accounts so they can start building credit at an early age. This practice is often referred to as “piggybacking,” and it is encouraged by numerous financial institutions.
Tradelines are capable of adding years of positive credit history to your credit report. The impact of a tradeline will largely depend on what is already in your credit file, so if you are interested in establishing a positive credit history, you should choose a tradeline that surpasses what is already in your profile.
How Will Adding a Tradeline Influence My Credit?
By adding a tradeline to your credit, you can influence a number of variables related to your credit, such as the:
- Number and type of accounts
- Credit utilization ratio
- Average age of credit accounts
- Age of your oldest account
Age is the most important factor influenced by tradelines. When you add a quality tradeline to your profile, you reap the benefits of a positive payment history stretching back years. For this reason, it is often more advantageous to add a tradeline instead of opening a new tradeline on your own. New tradelines can compromise your credit since they tend to have lower credit limits, which can decrease your credit score. Fortunately, most authorized user tradelines already have high credit limits and significant age.
The Equal Credit Opportunity Act of 1974
Historically, individuals have always wished to share access to their credit accounts with their spouses, children, employees, and others. Unfortunately, this was not always possible. Prior to the Equal Credit Opportunity Act (ECOA) of 1974, the credit accounts of married couples were always in the husband’s name. This made it nearly impossible for women to establish a positive credit history. To prevent this, the ECOA was passed to prohibit credit discrimination. Regulation B of the Act requires creditors to report spousal AU account information to credit reporting bureaus and consider them when evaluating creditworthiness.
In short, credit bureaus must treat all AU accounts the same. This is good news for those hoping to improve their credit history using tradelines.
Are Tradelines Legal?
In 2008, FICO unsuccessfully attempted to remove authorized user benefits from its credit scoring model. Thanks to the Equal Credit Opportunity Act of 1974, FICO still factors AU benefits into credit scores. The Federal Trade Commission and Federal Reserve Board have also conducted large-scale studies to evaluate the full impact of piggybacking. A 2010 study conducted by the Federal Reserve Board found that approximately one-third of credit files had at least one AU account, which proved piggybacking was a fairly common practice across the country.
How Do I Add a Tradeline to My Credit Profile?
To add a tradeline to your credit profile, you can open a primary account or add yourself as an authorized user to someone else’s account. For many people, it is remarkably difficult to establish credit since lenders are hesitant to extend credit to those with no credit history, which makes the authorized user approach appealing to many. To do this, you can either ask someone you trust or purchase a tradeline from an official tradeline company. When you purchase a tradeline, you can be sure you are purchasing a line of credit with an excellent payment history.
The cost of a tradeline will depend on its credit limit and age. This means older tradelines with higher limits will cost more.
Here at Coast Tradelines, we realize you may have lots of questions about tradelines. Our professionals will be more than happy to answer them and help you decide if using a tradeline to improve your credit is the right choice for you. Visit our website today to learn more.