Is Buying Tradelines Legal? What You Should Know

A tradeline is an entry on a credit report that describes an account, such as a credit card or a loan. This information is used by credit scoring models to help determine an individual’s creditworthiness. When people refer to “buying tradelines,” they generally mean paying to be added as an authorized user on someone else’s established credit account. This practice aims to improve one’s credit score by leveraging the primary account holder’s positive credit history. The legality of this practice is a complex issue with complex legal implications.

Legality for Individuals Acquiring Tradelines

Becoming an authorized user on a credit card account is a common and legal practice. For instance, family members frequently add spouses or children to their accounts to help them establish or build credit history. The legal questions surrounding buying tradelines arise from the intent behind the transaction, particularly when an individual pays a fee to be added to an account belonging to a stranger.

While being an authorized user is not inherently illegal, using a purchased tradeline with the intent to misrepresent one’s true creditworthiness to lenders could have legal implications. Credit scoring models consider authorized user accounts, and positive activity from such accounts can influence a credit score. However, if the purpose of acquiring a tradeline is to deceive a lender into approving credit that an individual would not otherwise qualify for, this could be viewed as fraudulent behavior.

Legality for Individuals Selling Tradelines

Individuals who sell authorized user slots on their credit card accounts often receive compensation. While not explicitly illegal, this activity can lead to violations of terms of service agreements with their credit card issuers. Credit card companies do not approve of their accounts being used for commercial purposes, especially when the authorized user has no genuine relationship with the primary cardholder and no intention of using the card for purchases.

Credit card issuers can view selling authorized user slots as a misuse of their services. If detected, such activity may result in the account being closed by the issuer. The primary account holder could also face consequences, including termination of their relationship with the financial institution. While there is no specific federal law prohibiting the sale of authorized user positions, the contractual agreements between cardholders and credit card companies typically outline acceptable use, and selling tradelines often falls outside these boundaries.

Regulatory and Industry Stance

The Fair Credit Reporting Act (FCRA) governs credit reporting accuracy and requires credit bureaus to investigate disputed information. Major credit bureaus report authorized user accounts, which can impact credit scores. However, credit bureaus may remove authorized user accounts from a credit report if they determine the relationship does not reflect a legitimate credit history or if the practice is deemed manipulative.

Regulatory bodies like the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) have expressed concerns about certain credit repair practices, including those involving tradelines. The FTC has filed complaints against companies that allegedly make false representations about improving credit scores through “piggybacking” on others’ credit, often charging illegal upfront fees. These actions highlight that while being an authorized user is legal, brokering or facilitating the sale of tradelines, particularly with deceptive promises, can be subject to scrutiny and legal action under consumer protection laws like the Credit Repair Organizations Act.