“How do tradelines work?”
It’s a question we hear all the time from people who are new to the tradeline industry. Perhaps you have even asked it yourself. In this article, we explain 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 appear in your credit file.
When someone is added as an authorized user to someone else’s account, often the full history of the account is then 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, after the AU is added, their credit report may begin to show years of history associated with the account.
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 get an early start on their credit. In fact, this practice of becoming an authorized user, often called “credit piggybacking,” is frequently promoted by banks and financial education sites.
As we mentioned, tradelines can appear on your credit report. Each tradeline on your credit report has its own credit history that is also included in your file. This means it’s important to choose the appropriate tradelines considering what you already have in your credit profile.
As we discussed in our article on building credit, tradelines in general are the foundation of all credit, since your credit report is essentially a file made up of information about your tradelines and how well you manage them.
The biggest influences on your credit are your payment history, credit utilization, and credit age, so these are the most important factors to consider when thinking about the role each of your accounts plays in your overall credit picture.
These considerations apply to both primary tradelines and authorized user tradelines.
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 acquire tradelines can pay a fee to become an authorized user on an existing credit account.
Tradeline companies serve as the intermediary, protecting the privacy of both the cardholders and the authorized users while facilitating the transaction.
Tradelines have been around since the advent of the modern credit system. Virtually as long as credit cards have existed, people have wanted to be able to share access to their accounts 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 the tradeline 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 Reserve Board has 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 report, 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 piggybacking credit is an appealing option.
If you are seeking to add authorized user tradelines to your credit report, you can either ask someone you trust to add you to one or more of their accounts or purchase tradelines from a tradeline company, which 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 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!
In addition, don’t forget to read our article, “The #1 Secret on How to Unlock the Power of Tradelines.”
How many tradelines you need depends on your specific situation. There are different cases in which buyers may want to get two or three tradelines, or sometimes even more, but there are other cases in which one tradeline will suffice.
If you really want to maximize your results and you have the budget to do so, buying multiple high-quality tradelines is the way to go. However, if you have budget constraints to deal with, it is usually best to focus your resources on one excellent tradeline.
For more examples and information on how to decide how many tradelines to buy, check out our article, “Buying Tradelines: How Many Do I Need?”
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.