Trade Lines

What is a tradeline? It may sound vaguely like something from the world of stocks and bonds, but it’s actually a vital part of credit reporting. In simplest terms, a tradeline is an individual account listing on your credit report. But if you’re looking to build and maintain a positive credit profile, it helps to know more than just what a credit tradeline is. Experts say it’s also helpful to know:

• The types of credit tradelines.
• What each tradeline includes.
• How tradelines are used.
• How long tradelines stay on your credit report.

By understanding all those elements, you might be better able to make financial decisions that can keep your tradelines healthy – and in the process establish good credit history and boost your credit score.

Each account you have is a single credit tradeline. That’s true whether your payment is current or past due, the account is open or closed, or the account is in your name only or held jointly with someone else. But all tradelines are not identical. They fall into three categories:

• Revolving accounts, such as credit cards or lines of credit. They’re known as revolving because the balance, available credit, and payment due all change as you make purchases and payments.
• Installment loans, such as personal loans, student loans, auto loans, or mortgages. These are accounts in which you borrow a fixed amount and repay it on fixed terms. Some experts consider mortgages a separate fourth category.
• Open accounts, which are payable in full when a buyer receives merchandise or something else of value. These accounts are more common for businesses than for individuals. 

The weight and elements of credit tradelines vary from one category to another. For example, falling behind on mortgage or auto loan payments will likely cause greater damage to your credit score than missing a credit card payment. And a credit card tradeline includes your credit limit and utilization, while an auto loan tradeline does not.

Tradelines, like the credit reports they are part of, are intended to help creditors minimize the risk of lending decisions. Therefore, each tradeline includes a wealth of potentially helpful information. Typically, this includes:¹

• Account type, such as revolving or installment.
• Partial or scrambled account number – to protect your privacy.
• Original loan amount or credit limit, for installment loans and credit cards, respectively.
• Current balance.
• Payment status, such as current or delinquent – and, if delinquent, by how much.
• Account responsibility – i.e., does the account belong to you or are you an authorized user?
• Minimum monthly payment.
• Date the account was opened.
• Date the account was closed, if applicable.
• Date of last activity, including payments.
• Payment history.
• Recent balance, for credit cards only.
• Name and address of the lender.

Although most tradelines include all the relevant information on this list, don’t be surprised if you find variations. It’s up to creditors to decide what to report to the credit agencies – or whether to report at all – so some may omit one or another of these categories. 

You can review your credit reports from all three major credit reporting agencies for free, once a year, at www.AnnualCreditReport.com. For each tradeline on your report, carefully check for errors in balances, payment history, or credit limits.

The data in your tradelines is used to calculate your credit score. In fact, you must have at least one tradeline that’s been active within the preceding six months to have a credit score. Each element of each tradeline contributes to your score, though the elements are weighted differently. Your payment history, for example, counts for more than how much of your available credit you’ve used. There are credit score simulator tools that allow you to play with how different elements of a hypothetical tradeline can affect your credit score.  

Creditors are free to use any of the details in your tradelines to better understand your financial situation. A series of recent late payments may be a sign that someone is struggling to keep up with bills, so creditors are less likely to approve credit applications. But late payments that were several years ago and haven’t been repeated may be seen as evidence that someone had a temporary setback and is now back on their feet. And a creditor who isn’t too concerned that you’ve maxed out a credit card with a $300 limit may feel very differently if you’ve maxed out a card with a $10,000 limit. That’s why you don’t want errors that work against your credit score to inhabit any tradeline.