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What Is a Tradeline and How Does It Affect My Credit? | Credit Cards
Key Takeaways
- A tradeline is an account that’s listed on your credit report.
- Your credit score is calculated using the tradelines in your credit report.
- Review your credit reports often to make sure that all the account information is accurate.
On your credit report, you’ll see a list of your credit accounts, which are referred to as tradelines. Since it’s important to regularly review your credit reports to make sure everything is accurate, learning about tradelines can help you do a more thorough review of your reports.
Tradeline Definition
A tradeline is an account that appears in your credit report. Examples include credit cards, mortgages, personal loans and auto loans. When a credit bureau is asked for your credit score, the tradelines in your credit report are used to generate that score.
What Kinds of Tradelines Are on a Credit Report?
There are two types of tradelines: revolving and installment. Credit cards and home equity lines of credit are examples of revolving tradelines. With this type of account, an individual is given a credit limit (or line of credit) and is allowed to use any amount of credit up to the limit. You can pay off your balance monthly or carry a balance and pay interest, depending on the terms of the agreement.
Mortgages, personal loans and student loans are examples of installment tradelines. With this type of account, you borrow a lump sum. Then you generally make fixed-interest monthly payments for the life of the loan.
Here’s the type of information you might see with each tradeline:
- Lender name and address.
- Type of account.
- Part of the account number.
- Current balance.
- Date you opened the account.
- Date the account was closed (if applicable).
- Date of your most recent activity.
- Your minimum monthly payment.
- Either the credit limit or the loan amount.
- Your name as either the account owner or an authorized user.
- Your payment history.
- Account status: Are you current or delinquent?
How Tradelines Affect Your Credit Score
When you apply for credit, a lender will request your credit score as part of the approval process. Your tradelines are used by the credit score algorithm to generate your three-digit credit score.
Here are the five factors that make up your FICO score along with the weight given to each factor:
If your credit activity results in a change to one of these factors, it might impact your score. Here’s an example: Let’s say you decide to close a credit card account. It doesn’t immediately affect your history, but you do lose the available credit for the closed card. This increases your credit utilization ratio, which is the amount of credit you’ve used compared with the amount you have available. A ratio that exceeds 30% will likely lower your credit score.
What Are Tradelines Used For?
The tradelines in your credit report are used primarily for calculating your credit score. But lenders also look at your tradelines when reviewing your credit application.
For instance, if you have a high balance on a credit card, a lender will note your credit limit to determine your credit utilization. If your credit utilization ratio exceeds 40% or 50% on a credit card account, this can be a red flag to an issuer. Similarly, if you have a late payment on your credit report, a lender will look to see how long ago that happened and whether your account is now in good standing.
When Are Tradelines Removed?
There are multiple reasons a tradeline might be removed from your credit report. If you decide to close a credit card account, for instance, the tradeline for that account doesn’t immediately fall off your credit report. In fact, a closed account that reflects positively on your credit could remain on your report for up to 10 years.
If you were an authorized user and you’ve been removed from an account, the tradeline will be deleted from your credit report after about two months.
Another scenario where you could request to have a tradeline removed is if fraud has occurred. Often, a fraudulent account has negative data associated with it, so the removal would help improve your credit score.
As for negative information, such as a credit card account in collections or a bankruptcy, those tradelines will remain on your report for seven to 10 years. Fortunately, the negative impact on your credit score starts to decrease after the first two years.
