How do tradelines work?
Anyone with a credit card could add you as an authorized user, despite any relationship (Mother, Father, Son, Friend, Stranger).
The information associated with that account (including its history) will report to your credit reports and impact your credit scores.
NOTE: This article was originally written in 2012 and updated on July 21, 2021
People tend to jump into the deep end of the pool of tradelines.
Sometimes, we need to return to the basics. It makes the more complicated stuff easier to understand.
This article is designed to answer “how tradelines work.”
Hopefully, we explain this easily.
Let’s if they work before how they work:
Do tradelines work? As a smart consumer, you’ve probably researched and wondered about adding tradelines to your credit report to increase your score and asked yourself “do tradelines work?”
It’s a shame that you can’t get a straightforward answer to such a simple question.
After all, when you ask “do tradelines work”, the sources of information usually have some skin in the game, right?
- You have people who are opposed to the idea (and will tell you “authorized user tradelines don’t work”)
- You have those who financially benefit from the idea (and will tell you that “seasoned tradelines absolutely still work”)
… wait, that’s us, right?
Why would you listen to us, then?
You shouldn’t and you shouldn’t listen to anyone with skin in the game, no matter on what side of the aisle they sit.
Instead, listen to a source impartial to the process, as we’ve quoted for you below.
We will withhold our opinions and allow the following to serve as the authority on the issue:
These numbers appear to indicate that the practice of piggybacking credit can increase credit scores to an economically significant extent if the account to which a nonprime borrower is being added is of sufficiently high quality. Furthermore, it appears that a large fraction of borrowers particularly borrowers with thin or short credit histories can obtain substantially higher credit scores as a result of this practice. This suggests that the practice of piggybacking credit offers the substantial potential to increase the credit scores of individuals added as authorized users on existing accounts and consequently to enhance their access to credit at lower costs.
– Finance and Economics Discussion Series
Divisions of Research & Statistics and Monetary Affairs
Federal Reserve Board, Washington, D.C.
In addition, we conducted a 24 page study, with graphs, analysis, and before-and-after results based on many different scenarios.
Whether tradelines work on not is abundantly covered in that study. You should read it.
That’s well and good, but how do tradelines work?
Here’s a quick video to introduce the topic of how tradelines work:
This is as simple as we can make it; here’s how tradelines work:
- Someone adds you as an authorized user on their credit card.
- The information associated with that credit card appears on your credit report.
- Your credit scores are impacted.*
*Note, I didn’t say your credit scores go up; I said they are impacted.
Because if you’re added to a credit card (as an authorized user) which has poor payment history, a balance, etc., you could actually negatively impact your credit score.
The goal is to be added to a credit card (i.e., a “tradeline”) that’s in good standing for the purpose of increasing your credit score.
Do tradelines work for everyone and all credit situations?
In fact, tradelines do not work every single time for every single situation. Well, they kind of do, but in some circumstances, the “increase” in score would be so minimal, that you can say it didn’t work.
In other circumstances, you could see huge increases in scores and still get denied for a loan (such as in the case of someone with recent bankruptcy and good credit scores).
The trick is getting a credit report analysis so we can help you create a credit plan to achieve your credit goal. This is one of the reasons you pay a company to add you. This practice is typically known as tradelines for sale.
Here’s a few options to consider:
- You can do that by getting started here. Getting started with an analysis is free, by the way.
- If you want to read a 24 page study that covers many different scenarios of before an after tradelines, click here.
- If you want run through our tradeline simulator and calculator, click here.
If you’re going to spend good money improving your credit score, you should know what to expect.
How is this legal?
The legalities of tradelines are complicated.
We discuss (and publish videos on) the legalities of tradelines, which you can read and watch here.
The basic legal answer is threefold:
- The Federal Reserve Board Regulation B implemented the Equal Credit Opportunity Act.
- That act provides that lenders must report information on a spouse’s authorized user account to the credit bureaus.
- It also provides that lenders consider this information when evaluating the credit history of the spouse.
However, the banks and bureaus treat all authorized user accounts the same.
I can’t tell you why they do this, but I can opine that distinguishing between spousal and non-spousal authorized user tradelines would be virtually impossible.
If you want to read a very complicated, yet extremely informative essay on the matter, please read “Credit Where None Is Due?”. It was written by the Federal Reserve Board, Washington, D.C.
The truth about tradelines.
Despite the confusion about what are and how they work, one thing is for sure…
Authorized user accounts are a great way to increase your credit score because they can instantly add years of history, positive payment history or even adjust debt to credit ratio.
If you are thinking about purchasing authorized accounts, please give get started or email us at firstname.lastname@example.org