What is a trade line?
A trade line is an account listed on a credit report. Each separate account is a different trade line. Trade-line information is provided by a lender or financial institution to credit-reporting bureaus, such as TransUnion. Trade lines are used to determine consumers’ credit scores.
Trade lines are records of consumer credit behavior. They show the activity and status of credit accounts. A trade line includes the creditor’s account name, a scrambled or truncated account number and the customer’s payment status. The trade line will tell whether a consumer is paying on time, late or not at all. It will also show how much is owed on the account.
The payment status is one of the most important bits of information in a trade line. This information shows the consumer’s loan repayment habits, something that lenders examine carefully when considering a loan application. Negative items such as charge-offs and collections show up in trade lines.
There are four types of accounts in a trade line:
- Installment accounts, such as a car loan or other fixed-payment loan.
- Mortgage accounts.
- Revolving accounts, such as credit cards or retail cards.
- Open accounts, on which the buyer pays in full upon the receipt of goods.
Trade line example
Ben plans to buy a house. He knows that lenders will check his credit history and credit score, so he decides to get a copy of his credit report from each of the major credit-reporting bureaus. Each report has a list of trade lines, including Ben’s two credit card accounts, his car loan and student loans. Each account, or trade line, has details about Ben’s payment history and the balance of each account.
Ben has never missed payments or paid late. When mortgage lenders see what a responsible borrower he is by looking at the trade lines on his credit reports, they will be competing for his business. This will give Ben leverage to negotiate the best interest rate.
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