Money Management

How Buying Tradelines Can Hurt Your Credit Score

Buying Tradelines
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If you’ve got a low credit score or a limited credit history, buying tradelines — which is also referred to as “piggybacking” — may seem like a good idea. 

After all, many companies that sell tradelines promise that you’ll get a near-immediate boost to your credit score, which could be the difference between buying a jalopy and getting a loan for a daily driver. 

While that’s true in some cases, buying tradelines can be expensive and risky. And it doesn’t always work. So we recommend avoiding this approach in favor of safer, more reliable options. 

Here are the most important things to know about the idea of buying tradelines:

  • While buying tradelines is legal, it’s against many credit providers’ terms of service. This means if you get caught, you may be permanently banned from working with certain companies.
  • Buying tradelines is legal, but you could get into trouble if you use your credit gains to get a loan or credit card. (If lenders suspect that you artificially inflated your credit score through purchasing tradelines, then used that enhanced score to obtain credit, they could consider this fraudulent behavior.)
  • Even if you avoid the worst possible outcomes, buying a tradeline is not guaranteed to work, depending on the specifics of your credit history. 
  • There are better, safer, and cheaper alternatives, such as starter credit cards, a credit builder loan from a reputable provider, or piggybacking on your parents’ or spouse’s credit accounts.
  • You can add other types of payments to your credit reports, such as rent and utilities, to build your credit score quicker.

What Is a Tradeline? 

“Tradeline” is the industry term that describes each account that appears on your credit report. Every time you open a credit account, you establish one. 

For individuals, there are two primary types of tradelines:

  • Installment accounts. This category includes things like mortgages, student loans, auto loans and credit accounts with fixed payments over a set time period.
  • Revolving accounts. These are credit cards and other lines of credit with variable payments due, which can be borrowed from and paid off at will.

The tradeline associated with each account includes basic information such as the account type, activity, balance and limit. These details help credit scoring companies like Equifax and TransUnion determine your creditworthiness by demonstrating things like your payment history and how long your credit accounts have been open.

When tradelines show positive credit behavior, they can improve your credit score. When they show problematic behavior — like missed payments or charged-off accounts — they can significantly lower your credit score.

It’s common for family members to share tradelines by adding their spouses and children to their credit accounts as “authorized users.” This is called piggybacking. And if the cardholder has a good credit history, it can offer a significant boost to the person receiving the tradeline.

Then there’s the legally and ethically murky practice of buying tradelines, which is when someone who is looking to improve their credit pays to become an authorized user on a stranger’s credit account (usually a credit card).

Our research for this article revealed that the cost for each tradeline ranges from a few hundred dollars to a couple of thousand dollars.

How Buying Tradelines Work

You’ll usually work with a tradeline broker to buy a tradeline. These companies recruit people with exceptional credit histories to sell space as an authorized user on their accounts. The buyer pays the broker and the broker pays the seller a commission.

You don’t get to stay on the seller’s card indefinitely. These arrangements usually last a couple of months (i.e., just long enough for the tradeline to show up on your credit report). Once the agreed-upon term has been reached, you’ll be removed from the card as an authorized user. 

The benefit of this is that it gives you a window of higher credit during which you have a better chance of getting a loan or credit card of your own, or a better rate on a loan for a high-value purchase.

To be added as an authorized user, yo have to provide your ID and Social Security number. That’s important to know because there are a lot of scams in this industry. No organizational body governs tradelines, which adds an element of risk when you’re handing over your personal information to a broker. While there are legitimate brokers in this space, there’s a lot of risk as well.

You typically don’t get a credit card for the account when you buy a tradeline, so you can’t impact it either way. However, you’re at the mercy of the primary account holder, so your credit could be negatively affected if they start mismanaging the account.

Thanks to a 1974 law called the Equal Credit Opportunity Act, buying tradelines is legal. This law was intended to enable women to build credit histories as authorized users on their husbands’ credit cards. It did so by prohibiting creditors from discriminating against people based on certain traits, such as marital status and sex.

However, an unintended consequence of this law (and the Federal Reserve’s Regulation B that followed) was that creditors began reporting authorized users to credit bureaus without identifying their relationship to the primary account holder. This is why it’s possible for parents to add their children to their credit cards, and why you can go buy a tradeline from a broker. 

However, buying tradelines is risky and can backfire. Though the act itself isn’t illegal, using purchased tradelines to artificially boost your credit score and then apply for credit may get you in trouble with the law as some lenders could consider doing so deceptive or fraudulent behavior. 

Why Buying Tradelines Can Hurt Your Credit 

Buying tradelines may seem like a panacea for bad or no credit, but it comes with a number of risks that you should be aware of before deciding to take the plunge.

1. It may be against the credit card provider’s terms of service

Though buying tradelines is legal, the credit card service the seller is using may not allow it. And even if there’s not an explicit provision against the practice in the Terms of Service, it may be considered fraudulent or deceptive, which would be covered under other provisions. 

The penalty for getting caught could be that the account is closed, leaving both you and the seller without a credit vehicle (and potentially, with lower credit scores).

2. You will suffer from any negative credit behavior of the card owner

You’re tying your credit to the primary cardholder when you become an authorized user on their account. This means their behavior affects your credit, for good or bad. If the primary cardholder racks up a high balance, misses payments or defaults on the account, it’ll have a significant detrimental effect on your credit score, even though you have no control over their actions.  

3. It puts you at risk for identity theft

There are at least two cases of identity theft every minute in the U.S., and trying to become an authorized user on a stranger’s account puts you at risk of becoming one of them. This is because you have to give up information like your name, address and Social Security number to be added to a credit card, making you especially vulnerable.

Even if you verify that the tradeline brokerage firm you’re working with is reputable, there’s no guarantee that they’ve taken proper precautions to protect your information. Plus, that information has to be passed on to the seller, who is just a random person with a credit account.

Some of the signs you might’ve fallen victim to identity theft are new accounts appearing on your credit report, delinquent debts you didn’t open being collected on, and loan application denials.

4. It’s expensive and not guaranteed to work

Buying a tradeline could cost thousands of dollars and do nothing for your credit score. Even accounts with higher limits and longer histories, which cost the most because they could significantly impact your credit score, aren’t guaranteed to move the needle. 

First, that’s because some credit card companies don’t report all authorized users on their accounts. If you pay to be an authorized user on one of these accounts, your credit score won’t increase because the tradeline will never appear on your credit report.

Even if the credit card company does report all authorized users, you may not benefit. A single tradeline doesn’t define your credit score, so adding one with a positive history may make no difference at all. If you have multiple charge-offs, for example, adding tradelines in the first few years after the debt went into default is unlikely to have much of an effect.

Besides that, credit scoring companies like FICO have implemented tools to mitigate the impact of piggybacking on scores by deeply decreasing the benefit to the authorized user’s account.

5. The cardholder can remove you as an authorized user, erasing any positive payment history (and thus lowering your score)

The cardholder can and will remove you from their account. When you buy a tradeline, you are only an authorized user for a certain amount of time, so it’s best to be prepared for a dip in your credit score when that happens. 

This is because the cardholder’s positive payment history and presumably good credit utilization ratio — the percentage of credit you’re using compared to your limit — will no longer be applied to your credit report.

The impact of your credit utilization ratio and payment history on your overall credit score is significant. However, they’re not all that’s considered when tabulating your credit score, so it’s impossible to predict how much of a dip you’ll suffer.

What to Do Instead

Buying a tradeline isn’t a good idea, but there are things you can do to repair or build your credit.

Piggyback on a family member’s or trusted friend’s card

The difference between piggybacking on your family member’s or trusted friend’s credit card and buying a tradeline is that you have a relationship and there’s generally no financial transaction involved. 

You’re also likely to get a credit card yourself, so you can learn and employ good credit habits. Further, you’ll probably stay on your family member’s card as an authorized user longer than you would a stranger’s to which you bought access.

And lastly, credit companies do not look down on this practice. (They actually encourage it.)

Find a co-signer

Similar to piggybacking on a relative’s credit card, you could find someone to co-sign for a loan or unsecured credit card for you. The co-signer tells the lender that you’re good for the payments and promises to make up for them if you’re not. In this way, you can gain access to credit that you wouldn’t have otherwise had and establish credit history on a new tradeline.

Get a secured credit card

A secured credit card is another option if you have low credit or not much credit history. The catch is you have to pay a security deposit to get the card, which can be hundreds of dollars. 

The exact figure will match your credit limit (e.g., a $500 limit will require a $500 deposit), and you’ll have to establish a solid payment history before you can access it again. 

Secured credit cards help your credit score as long as you make your payments on time and keep your credit utilization ratio low. 

However, not all secured credit cards report your activity to the credit bureaus, so you’ll need to make doubly sure that yours does before you commit.

Get a credit builder loan

Credit builder loans come in various forms, but they generally share the goal of helping you build or improve your credit score. With a typical credit builder loan, rather than receiving the loan amount upfront, the lender locks it away in an account. 

You then make scheduled payments toward this loan. As each payment gets reported as an on-time payment to the credit bureaus, your credit builds over time. 

After you’ve made all the payments, you receive the total amount saved, effectively making it a forced savings program and a credit-building tool.

We’ve reviewed many of the top credit builder loan providers, including Chime, Self, and Brigit

Add other types of bills to your credit reports

There are a lot of monthly bills that don’t typically affect your credit score, including your utilities and rent. The free service Experian Boost allows you to count dozens of them, even Netflix and Disney+, to help you more rapidly build your credit score.

Dispute errors on your credit report

Any number of things could be wrong on your credit report, and that could be tanking your score. Use the free annual credit report you can get from annualcreditreport.com to check things out and notify the credit bureaus of any mistakes you find.

Make sure you’re looking at reports from each agency (Equifax, Transunion, and Experian), as there are often differences between them. These differences are likely errors. 

Beyond annualcreditreport.com, free services such as Credit Karma alert you whenever your credit report changes. This proactive approach can eliminate or lessen potential credit theft, as you’re able to act quickly.

Bottom Line: Buying Tradelines Is a Risky Idea

The allure of a quick boost to your credit score may tempt you to buy tradelines, but as with most shortcuts, the risks far outweigh the potential benefits. Anything from getting taken for a ride by an illegitimate broker to having your identity stolen could happen. 

Safer alternatives like secured credit cards and credit builder loans are better paths toward higher credit scores, particularly if you have limited or no credit. Better still is finding a co-signer for a loan, or getting on a money-smart relative or friend’s credit card and reaping the benefits of their good financial management.

That said, these methods aren’t silver bullets. They’ll take time and rely on you practicing good credit habits to succeed.

Cleveland Dietz
Cleveland Dietz is a freelance writer specializing in personal finance. He learned the power of good money management while digging himself out of credit card and student loan debt. Since then, he has experimented with side hustles and investing strategies. Follow him on Twitter @dietziic.

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