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Trade Lines

/ Trade Lines

What do You need to Know About Trade Lines?

When you borrow, there is a record of activity for that credit which is reported to a credit reporting agency. A credit reporting agency is a business having historical credit information on companies and individuals. The lenders are the ones who give these reports to the credit reporting agency. Once your credit is approved, a trade line is established on your credit report.  

How does a trade line work?

A trade line can be best described as a record-keeping mechanism helping lenders track borrowers’ activity on their credit reports. A corresponding trade line is established for each credit account you may have. Therefore, you can have multiple trade lines on your credit report. Each trade line represents each borrowing that lenders have approved. ur credit is approved, a trade line is established on your credit report.  

The credit reporting agency can use the information on your trade lines to calculate your credit score. The credit score is helpful to lenders when they want to assess your creditworthiness.  

Graphical chart

How does a trade line work?

Not all trade line accounts are similar. Trade line accounts can fall into three different categories. They are; 

Revolving accounts,

Such as lines of credit and credit cards. These accounts are referred to as revolving because the available credit, balance, and payment due constantly change (revolve) as you make purchases.

Installment loans

such as mortgages, car loans, and personal loans. The accounts often entail a fixed amount, and payments are made on fixed terms.

Open accounts

Open accounts are more common in businesses because they entail obtaining merchandise or valuable goods on credit.

/ Data Points

What are the data points included in a trade line?

A trade line has various data points which mainly relate to the creditor, the type of credit, and the lender. It will specifically have the names of the creditor and the lender, an identifier of the type of credit provided, the account’s payment status, and the parties responsible for paying the credit. 

The account’s payment status entails data points on whether payments are made or not. If the payments are not made on time, the trade line records the late payments. If they are made on time, the records will show that payments are made according to the credit agreement terms. 

The trade line may also have records on the specific account milestones, such as; the date the lender extended the credit, the payment history, credit limit, and missed payments, if any. Note that even when you close an account, the trade line of the account will remain for seven years, but in exceptional cases, the account may go away sooner. 

/ Credit Scores

How do trade lines affect credit scores?

This piece had earlier mentioned that trade lines could affect your credit score. This part will explore how trade lines affect your credit scores. Generally, higher scores will be given to individuals with a more-favorable trade line reporting. A favorable trade line reporting entails a history of making on-time payments. 

However, late payments and bankruptcies will affect your credit report negatively. Also, note that the weight and elements of credit trade lines vary from one account to another. For example, falling behind on an installment loan account (mortgages and car loans) may cause more harm to your credit score than falling behind on your revolving account (credit cards).  

In summary, the main factors considered when assessing your credit score are the number of trade lines, payment history, type of trade lines, and lengths of open accounts. Note that some renders insist on analyzing your entire trade line to assess your creditworthiness.  

/ Time Frame

How long do trade lines last?

Trade lines often appear 15 days after your credit is approved. It may delay showing up on your credit report, but this delay often doesn’t go beyond 45 days. Each credit reporting agency has different timelines for maintaining a trade line account. Usually, the trade lines accounts may be closed after seven to 10 years.  

Please note that if you discover a trade line that is fraudulent or erroneous, you can dispute it. You can do this by forwarding valid proof to the bureau agencies. Once you furnish them with the evidence, the trade lines are often removed within 30 days.  

/ In Conclusion

The Bottom Line

A trade line is a mechanism to track borrowers’ activities. An example of a trade line can be your car payment history. It can contain details of your contact information, payment status, and the date the credit account was opened and closed. These trade lines can affect your credit score and creditworthiness, so be careful and track your trade lines.