“How do tradelines work?” It’s a question we hear all the time from people who are new to the tradeline industry. We’ll break down what tradelines are, how tradelines work, and how they can affect your credit.
While the term “tradeline” simply means any credit account, in our business, it usually refers specifically to authorized user (AU) tradelines, or authorized user positions on someone’s credit card. An AU tradeline is an account on which you are designated as an authorized user, which means you are not liable for the charges incurred on the account. However, the tradeline can still affect your credit file.
Visit “What Is a Tradeline?” for a more detailed explanation of what tradelines are and how they can be used.
When someone is added as an authorized user to someone else’s account, often the full history of the account is reflected in the records of both the primary account holder and the AU. This is because credit records do not report the date the AU was added to the account. So, as soon as the AU is added, their credit report may show years of history associated with the account.
Therefore, authorized user tradelines can be used as a way to add credit history to someone’s credit report.
One common example of this is when a parent designates their child as an authorized user of one of their credit cards as a way to help them start building credit early in life. In fact, this practice of building credit as an authorized user, often called “piggybacking,” is frequently promoted by banks.
As we mentioned, tradelines can add years of credit history to your credit report. This is a good thing if the credit history is better than what you already have in your credit file, but not so much if the account is delinquent. If the account has late payments or high utilization, those negative marks could hurt your credit.
Depending on your own credit history and the history of the AU account, your credit score could increase, stay the same, or even decrease. The power of a tradeline is always relative to what is already in your credit file.
If you are interested in building credit as an authorized user, it is essential to make sure that the tradeline you are adding is superior to your existing tradelines so that it improves your credit profile rather than bringing it down.
Adding quality tradelines to your credit file can improve many of the variables that go into your credit score, such as your average age of accounts, age of oldest account, overall utilization ratio, number of accounts, mix of accounts, and more.
The most important factor that tradelines bring to the table is age, because with age also comes perfect payment history. These two factors combined make up 50% of your credit score, so adding a tradeline with a lot of age can have a big influence on your credit.
Due to the power of these factors, adding AU tradelines to your credit file can often be even more beneficial than opening new primary tradelines. This is because new primary tradelines will have no age and will probably have relatively low credit limits, which can drag down important metrics in your credit file. On the other hand, authorized user tradelines can add significant age and high credit limits, which has the opposite effect.
The tradeline industry took this concept of “piggybacking credit,” as it is often called, and created a marketplace where tradelines could be bought and sold. Essentially, people who want to add tradelines to their credit file can pay a fee to be an authorized user on someone else’s credit card, even if the two parties are complete strangers.
Tradeline companies serve as the intermediary, protecting the privacy of both the cardholders and the authorized users and facilitating the transaction.
Tradelines have been around since the advent of the modern credit system. Virtually as long as credit cards have existed, people wanted to be able to share access to their account with others, such as spouses, children, or employees.
However, the role of authorized users was not always considered equally by the credit bureaus. Until the Equal Opportunity Credit Act of 1974, creditors often used to report accounts that were shared by married couples as being only in the husband’s name. This prevented women from building up a credit history in their own names.
In response to this unequal treatment, ECOA was passed to prohibit discrimination in lending.
Regulation B is a section of ECOA that requires creditors to report spousal AU accounts to the credit bureaus and consider them when evaluating credit history. Since lenders generally do not distinguish between AUs who are spouses and those who are not, this effectively requires that credit bureaus must treat all AU accounts the same.
It was as a result of this policy that the practice of “piggybacking credit” emerged as a common and acceptable way for consumers with good credit to help their spouses, children, and loved ones build credit.
Thanks to ECOA, authorized user tradelines are still weighted very heavily in credit scoring models.
For more on the history of AU tradelines and the policies and regulations that govern our industry, read our article, “Do Tradelines Still Work in 2019?”
While Tradeline Supply Company, LLC does not provide legal advice, we can answer this common question by referring to official proceedings and statements from the authorities.
The issue of tradelines and credit piggybacking went all the way up to the U.S. Congress in 2008, when FICO tried—unsuccessfully—to eliminate authorized user benefits from its credit scoring model. They ultimately reversed their stance and decided to keep factoring AU benefits into credit scores thanks to the Equal Credit Opportunity Act of 1974.
The Federal Trade Commission and the Federal Reserve Board have also weighed in on this topic. In 2010, the Federal Reserve Board conducted a large-scale study on piggybacking and found that over one-third of the credit files that could be scored had at least one AU account in their credit profile, which shows that piggybacking credit is an extremely common practice.
Learn more about your legal right to use authorized user tradelines in our article, “Are Tradelines Legal?”
To add tradelines to your credit, you can either open your own primary accounts or you can be added as an authorized user to someone else’s credit account. For many people, it is difficult to start building credit on their own because creditors are hesitant to lend to someone with no credit history, which is why the authorized user route is an appealing option.
If you are seeking to add authorized user tradelines to your credit file, you can either ask someone you trust to add you to one or more of their accounts or purchase tradelines from a tradeline company. The benefit of buying our tradelines as opposed to asking someone you know is that all of our tradelines are guaranteed to have perfect payment histories and low utilization.
Our tradelines range in price from $150 to around $1,500 depending on two main variables:
Generally, the older the tradeline is and the higher the credit limit is, the more powerful it will be and the higher the price will be (and vice versa). We delve into further details and examples of the cost of tradelines on our FAQ page, “How Much Do Tradelines Cost?”
Our tradelines stay on your credit report for two reporting cycles, which is approximately two months.
After the two months of being an active authorized user is complete, you will be removed from the account and the tradeline will then appear as closed. A closed tradeline will often remain on your credit report for several years.
For more information on this, see our FAQ page on “How Long Do Tradelines Stay on Your Credit?”
The two main factors that you need to take into account when choosing a tradeline are age and credit limit. For most people, we recommend prioritizing the age of the tradeline, because age is usually the most powerful factor of a tradeline.
However, your strategy may vary depending on your specific goals. There are some situations in which the credit limit can be more important. Our in-depth tradeline buyer’s guide that has all the information you need to help you choose a tradeline.
In choosing the right tradelines for you, It is helpful to be able to calculate how a tradeline could affect your average age of accounts and utilization ratios. Try out our custom tradeline calculator, which does the math for you!
Historically, only those with privilege and wealth have been able to use the strategy of credit piggybacking. Those who do not have family members with good credit to ask for help, or could not afford the high cost of tradelines, had nowhere to turn, so their options for building credit are often extremely limited and very costly.
To us, it does not seem fair that some people have the option of credit piggybacking but others do not. By offering tradelines at affordable prices, we aim to bridge this gap and help provide a chance at equal credit opportunity for all.