Have you heard of tradelines?
Whatever credit account you have on your credit report – be it a revolving account or an installment account – it is addressed as a tradeline by credit reporting agencies.
Each time a new credit account is opened, a new tradeline is created on your credit report.
If an account is sold to another creditor or lender, then a new tradeline is created.
The same goes for when you receive a new credit card after reporting the old one as lost or stolen.
1. What are tradelines used for?
Tradelines hold information about the creditor as well as the debt.
So, a tradeline on your report can provide information such as the lender's name and address, the type of account, partial account number, the current status of the account as well as current balance, date the account was opened or closed, current/recent balance of the account, date of last activity, original loan amount or credit limit, monthly payment, payment history, whether there have been any delinquencies in the last seven years, etc.
The above information is mainly used for calculating credit scores and can also be accessed by lenders to get more information about your account.
Let’s say that your credit score suddenly dips because of an increase in credit utilization ratio.
In that case, a lender may investigate the information in your tradelines to get a better understanding.
For example, a rise in credit utilization ratio if your credit limit is just $500 is perhaps not as worrying as it would be if the credit limit was $5,000.
2. Effect of tradelines on your credit
To generate a credit score, you must have at least one tradeline that has been active in the last six months.
Overall, if you’ve paid your dues on time, and kept card balances low, it is likely that you’ll have a good credit score.
Unfortunately, we don’t really know the optimum number of tradelines for achieving a great credit score.
Ideally, you should open only as many tradelines as you need and can maintain properly – if there are too few tradelines on your report, lenders may feel you lack sufficient credit history.
If there are too many, it can mean that you may have bitten off more than you can chew.
3. What happens when a tradeline is removed from your report?
Let’s say you were the authorized user on someone else’s card and the primary cardholder removed you from the account.
In that case, removal of that tradeline from your report may cause a dip in your scores if the tradeline had a positive credit history.
On the other hand, if that tradeline had issues like missed payments, then your score may receive a boost.
If a tradeline has been fraudulently opened on your account, then you must inform the credit bureau about it, and have it removed.
By getting rid of unauthorized accounts, you can boost your credit. To accomplish this, you must check your credit report at regular intervals.
You can access three free credit reports a year throughannualcreditreport.com.
Generally speaking, all open tradelines will remain on your credit report indefinitely.
All closed ones with positive information will stay on your account depending on the reporting bureau’s guidelines.
Closed tradelines with negative information will be automatically removed from your account after 7 to 10 years.
Review your credit report frequently to stay on top of your tradelines and the information contained in them.
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