Trade Line: Definition, How It Works, and Included Records

What Is a Trade Line?

A trade line is a record of credit activity reported to a credit reporting agency. It is created when a borrower is approved for credit and includes all associated account activity.

Trade lines are used to calculate a borrower’s credit score, but their importance varies among different credit reporting agencies.

Key Takeaways

• A trade line keeps track of credit activity on a borrower’s account.
• It includes information on different types of credit, such as mortgages, loans, and credit cards.
• Trade lines provide details on creditors, lenders, and the type of credit given.
• Closed accounts can remain on trade lines for seven to ten years.
• Reviewing trade lines is crucial to ensure accuracy and validity of information.

How a Trade Line Works

A trade line tracks a borrower’s credit activity on their credit report. Each credit account has its own trade line, and borrowers can have multiple trade lines representing different approved borrowing accounts.

There are three main types of trade lines: revolving trade lines, installment trade lines, and open accounts. Revolving trade lines include credit cards, while installment trade lines cover loans like car loans and mortgages. Open accounts are typically associated with businesses.

If a trade line is created fraudulently in your name, you can have it removed from your credit history.

Records Included in a Trade Line

Trade lines contain various data points relating to creditors, lenders, and the type of credit provided. These include the names of parties involved, account identifiers, payment statuses, and account milestones.

The trade line also includes details like the credit extension date, credit limits, payment histories, delinquency levels, and total amounts owed. Closed accounts generally remain on trade lines for seven years, although they may disappear sooner.

Payment status indicates whether loan payments are made on time and how late they are if they are not. The trade line information is used to calculate credit scores, and lenders may request a detailed report when assessing credit applications.

FICO Credit Score

Your FICO score, which lenders use during the application process, is determined by information listed on trade lines. Here’s how different sections of your FICO score relate to trade lines:

• Payment History (35%): Trade lines include closed debts or lines of credit up to 10 years.
• Amounts Owed (30%): Each line of credit has its own trade line.
• Length of Credit History (15%): Trade lines include all payment history and missed installments.
• New Credit (10%): Trade lines are generally created within a month of the first payment.
• Credit Mix (10%): Trade lines represent various types of loans and credit accounts.

What Is a Trade Line?

A trade line summarizes each revolving or installment credit in your name. It provides details about your payment history, credit history, and delinquencies, ultimately conveying your creditworthiness to creditors and lenders.

What Is an Example of a Trade Line?

An example of a trade line is your car payment history. It summarizes your contact information, current payment status, opening and closing dates of the credit line, as well as current balance and monthly payment amount.

Can Trade Lines Hurt Your Credit?

Yes, trade lines can negatively impact your credit by indicating prior creditworthiness, current debt, and historical payment delinquencies.

How Do You Get a Trade Line?

A trade line is automatically created when you start a new line of credit. For example, opening a new credit card results in a specific trade line. As you use the card and pay off balances, a credit history is established.

How Long Do Trade Lines Last?

Trade lines may appear on your credit report within 15 to 45 days of a purchase. They typically remain on your account for ten years after being closed, though negative trade lines are usually removed within seven to ten years.

You can dispute fraudulent or erroneous trade lines. If credit bureaus receive valid proof, these trade lines are usually removed within 30 days of review.