What is a Trade Line?

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Trade lines are found in your credit report and record the payment history, balance, current status, and other vital details for each credit account.

🤔 Understanding trade lines

Trade lines show the activity for each of your credit accounts, including mortgages, auto loans, credit cards, and lines of credit. Every time you take out a loan or open a credit card, a trade line is created to record your activity. So, if you make (or miss) payments, it'll be noted in the trade line. Trade lines will also typically show the current balance, payment history, monthly payments, whether the account is open or closed, credit limits, and any other important details. For lenders, trade lines provide a snapshot of your creditworthiness. They are also used by credit bureaus to help calculate your credit score.


Imagine Jane wants to buy a house. She's saved up some money, but not nearly enough to buy a home. So, she'll have to take out a mortgage.

Before applying, Jane gets a copy of her credit report and finds a list detailing her credit cards, an auto loan, and student loans. These are her individual trade lines and show her payment history, current balance, and other details.

Jane's trade lines show no late payments and low balances. She has nearly paid off her auto loan, and her student loan principal is shrinking. She has an excellent credit history, and mortgage lenders are likely going to compete for her business.


A trade line is like a grade report for a class at school…

Except instead of grading your performance in science or art, a trade line details each of your credit accounts. In school, you receive a grade for each class. Some teachers break grades down by tests, essays, homework, and other factors. For credit accounts, you'll have a trade line for mortgages, credit cards, car loans, and other accounts. Each trade line will detail your account status, payment history, balance, and other important details.

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What is a trade line?

Every time you open up a credit account, a new trade line is created in your credit report. This trade line will contain details about your credit account, including:

  • Account type (loan, credit line, etc.)
  • Name and address of the lender
  • Date the account was opened and closed (if applicable)
  • Current account balance
  • Loan total and/or credit limit
  • Monthly payment
  • Payment history (including missed payments)

A trade line will also often contain a partial account number, the date of your last activity, and your current account balance. However, individual trade lines may contain different information. It’s up to lenders to determine exactly what data to report, so the information for each account may vary.

If you apply for a new credit card or try to open up another credit account, lenders will typically check your credit report. They may look at your individual trade lines and the activity on each account while making a decision.

What are trade lines used for?

Trade lines are used to calculate credit scores.

Everyone who has opened a credit account, such as a credit card, or taken out a loan, has a credit score. This credit score indicates your creditworthiness and is often used by lenders to determine whether they should extend you credit or provide a loan.

A trade line includes your activity for each credit account or loan. Credit bureaus take these individual activities, analyze them, and then assign you a credit score. This credit score will affect how much lenders are willing to lend you and at what rate.

A high credit score means you're a lower-risk borrower. Based on your credit history, lenders can be pretty confident that you'll make your payments.

A low credit score means you're a higher-risk borrower. Lenders may still be willing to lend to you, but because the risks are more significant, they'll charge a higher interest rate.

Many lenders want to know the details about your credit history. After looking at your credit score, the lender can also look through your credit report and each trade line. The lender can learn more about your payment history, outstanding debt, recent activity, and other factors.

This information will help the lender determine whether to lend to you and what interest rate they should charge.

How do trade lines work?

Trade lines are subsections of your credit report, which is used to calculate your credit score. They contain details for each credit account. This information is then compiled and quantified to calculate your credit score.

Lenders generally use credit scores to determine how likely you are to pay bills on time. Newer information and activity on your trade line generally has a more significant impact on your credit score. Negative details in your trade lines will have less of an effect as time passes.

Typically, trade lines will stay on your account for years, even if you close the account. Good trade lines may remain on your credit account indefinitely. Derogatory marks, such as missed payments, must usually be removed after seven years.

It’s also possible to be added to trade lines as an authorized user. In this case, someone else will be the primary account user, but you’re also authorized to use the credit.

If your parents have an excellent credit history, for example, you can be added to one of their credit cards as an authorized user. Your parent’s good history may boost your credit score.

How do trade lines impact your credit?

Trade lines have a significant impact on your credit score. They are the primary source of information that credit bureaus use to calculate your credit score. So what details in your trade lines could impact your credit score?

Credit score companies calculate credit scores in different ways.

Experian uses FICO Score 8, a method for reporting creditworthiness. Experian notes that five factors can impact your credit score:

  • Payment history: Accounts for 35% of your credit score, making it the most significant single factor. Regularly making payments improves your score. Missing payments hurts it.
  • Credit utilization: How much of your available credit have you used? Accounts for 30% of your credit score. It's best to use 30% or less of your available credit.
  • Credit history length: Makes up 15% of your credit score. Your history length will show your oldest held accounts and your newest accounts as well. A longer history is generally better.
  • Credit mix: It's usually best to have a mix of credit accounts, such as car loans, mortgages, credit cards, student loans, and other products. Makes up 10% of your credit score.
  • New credit: How many credit accounts have you opened recently? How many hard inquiries — meaning a lender checks your credit report — have you had lately? A large number of new accounts and hard pulls will be detrimental to your score. Makes up 10% of your credit score.

Is it illegal to buy trade lines?

It's possible to buy trade lines. You pay a for-profit company, which then has you added to someone's credit account as an authorized user. The primary account holder will have a "seasoned trade line," meaning an extensive, positive history. This may boost your credit score.

Currently, it's not illegal to buy a trade line, although the activity does exist in a legal gray area. Selling and buying trade lines may also violate the terms of service laid out by your lender.

Criminals have used trade lines to commit fraud. Scammers use authorized trade lines to build a credit history for fake identities. The primary account is legitimate and has a positive credit history. They then create false identities and tie them to the primary account to build a credit history. Then, the scammers can take money from lenders and never pay it back.

On the other hand, it’s perfectly legal and often encouraged to be added to a family member’s trade line. In this case, you’re not buying a trade line and you know the person.

This is a legitimate way to build your credit and may be especially helpful for people with a limited credit history, assuming your family member has a good credit history.

What happens when you are removed from a trade line?

It's possible to be removed from a trade line. You can become an authorized user on someone else’s credit card. For example, your parents could add you to their credit card account. Your parents could later remove you, however. Or you can have yourself removed. The relevant trade line will then be removed from your credit report.

Every trade line affects your score. When one is removed, the data from the trade line is no longer used to calculate your credit score.

If the trade line had positive information, such as regular payments, your credit score could go down. On the other hand, if the trade line contained negative information, such as missed payments, your credit score could increase once it's removed.

Are trade lines good or bad?

Trade lines are neither good nor bad. They are simply information. Whether that information is good or bad depends on how you manage your debt and credit accounts.

If trade lines contain negative information, such as missed payments, your score will be hurt. You can avoid "bad" trade lines by paying your debts and otherwise doing things that will improve your credit score.

Your credit score can have a big impact on your financial life. With a high credit score, you’ll generally have an easier time getting loans and credit, such as a mortgage. You’ll also typically pay less in interest, saving you money.

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The free stock offer is available to new users only, subject to the terms and conditions at rbnhd.co/freestock. Free stock chosen randomly from the program’s inventory. Securities trading is offered through Robinhood Financial LLC.


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