Trade Line

What Is a Trade Line?

A trade line is a record of activity for any type of credit extended to a borrower and reported to a credit reporting agency. A trade line is established on a borrower’s credit report when a borrower is approved for credit. The trade line records all of the activity associated with an account.

Comprehensively, trade lines are used by credit reporting agencies to calculate a borrower’s credit score. Different credit reporting agencies give differing weights to the activities of trade lines when establishing a credit score for borrowers.

Key Takeaways

  • A trade line is created on a borrower’s credit report to keep track of all the activity on the account.
  • A trade line is created for every line of credit or account a debtor has such as a mortgage, car loan, student loan, credit card, or personal loan.
  • Trade lines include information on the creditor, the lender, and the type of credit given.
  • A closed credit account will generally remain on a trade line for 7 to 10 years.
  • A trade line includes all relevant information used to determine your credit score. It is important to review your trade line to ensure all information is valid and free from error.

How a Trade Line Works

A trade line is an important record-keeping mechanism that tracks the activity of borrowers on their credit reports. Each credit account has its own trade line. Borrowers will have multiple trade lines on their credit report, each representing the individual borrowing accounts for which they have been approved.

The basic types of accounts that have a trade line are those paid off in fixed installments, and these accounts are often broken into categories. First, revolving trade lines are reported on credit cards or other lines of credit. Second, installment trade lines report the history of car loans, mortgages, student loans, and personal loans. Open accounts, a third type of account on a trade line, are often associated with businesses as opposed to individuals.

Should a trade line be created in your name fraudulently, you can request to have the trade line removed from your credit history.

Understanding Trade Lines

Trade lines may contain a variety of different data points related to the creditor, the lender, and the type of credit that is being provided. The trade line often contains the name of the creditor or lender, the account or another identifier for the type of credit being provided, the parties responsible for paying the loan, and the payment status of the account.

The trade line will also contain particular account milestones, such as the date the credit was extended, the credit limit, the payment history, all levels of delinquency if any missed payments have occurred, and the total amount owed as of the last report. If a consumer closes an account, that account will typically remain on his or her credit report as a trade line for seven years, though in some cases the account can go away sooner.

Payment status indicates whether or not payments for the loan are being made on time and how late they are if they are not being made on time. If the payments are being made on time, the payment status will indicate that the payments are being made according to the terms of the credit agreement.

The information included in your trade lines is used to calculate your credit scores. While your credit score is a summarized snapshot of your creditworthiness, lenders may inquire to see a detailed report of your entire trade line.

Special Considerations

Late payments are usually grouped in a range of days according to how late they are. For example, delinquencies may be reported as 30 days late, 60 days late, or 90 days late. The payment status may be set to “charge off” if the creditor deems it unlikely that the debt will be repaid, and the status may also indicate that the credit recipient has entered bankruptcy.

As trade lines are used by credit reporting agencies to develop an individual’s credit score, credit scores vary, with higher scores generally given to individuals with more-favorable trade line reporting. Factors considered when calculating the credit score include the number of trade lines, types of trade lines, lengths of open accounts, and payment history.

In addition to reviewing a borrower’s credit score, a lender who pulls data from a credit-reporting agency may also comprehensively analyze all of the trade line reporting on a credit report when considering a credit application in the underwriting process.

FICO Credit Score

When applying for credit, your lender will often request your credit score as part of the approval process. Your FICO score is directly determined from the information listed on each trade line. Below is how your FICO score is calculated and how each section relates to trade lines.

  • Payment History (35%): Trade lines include debt or lines of credit that have been closed for up to 10 years.
  • Amounts Owed (30%): Trade lines are created for every line of credit. Each line of credit, revolving line, or installment agreement has its own trade line.
  • Length of Credit History (15%): Trade lines include every payment you've ever made against every account or line. This also includes every installment payment you've missed.
  • New Credit (10%): Trade lines are generally created within a month of the first payment being made on the associated line or account.
  • Credit Mix (10%): Trade lines are created for a variety of types of accounts including mortgages, car loans, credit cards, student loans, and personal loans.

What Is a Trade Line?

A trade line is a summary on every revolving or installment credit you have. This detailed report outlines your creditworthiness by communicating to creditors and lenders your payment history, your credit history, and your delinquencies.

What Is an Example of a Trade Line?

A trade line is created for every credit line you own. An example of a trade line is your car payment history. When you begin repaying a car loan, a trade line is created that summarizes your contact information, your current payment status, the date the line of credit was opened, and the date the line was closed.

The trade line will also report current information such as the date of your last payment, the current balance remaining, and your monthly payment amount.

Can Trade Lines Hurt Your Credit?

Yes, trade lines communicate to lenders your prior creditworthiness and details how much debt you have, what your current minimum monthly payments are, and what your historical payment delinquencies are.

How Do You Get a Trade Line?

A trade line is automatically created for you when a new line of credit is started. For example, when you sign up for a new credit card, a new trade line is created specific to that individual line of credit. As you incur purchases on the card and pay off debt balances, a record of history is created.

How Long Do Trade Lines Last?

Trade lines may show up on your credit report as soon as 15 days after the time of purchase. Alternatively, a trade line may be delayed on showing on your report up to 45 days depending on the timing of the purchase.

Each credit reporting agency may have varying terms on how long a trade line is maintained. In general, a trade line is often maintained on your account 10 years after the trade line has been closed. Trade lines with a negative history are generally closed between 7 to 10 years.

Trade lines for fraudulent or erroneous reports can be disputed. After credit bureau agencies receive valid proof, these trade lines are often removed within 30 days of review.

Article Sources

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  1. MyFICO. "How Are FICO Scores Calculated?"

  2. American Express. "What Is a Credit Tradeline?"

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