Is It Illegal to Buy Tradelines to Boost Your Credit?

A tradeline is an entry on a credit report that details a credit account, such as a credit card, loan, or mortgage. It records the trade between an individual and their creditor, providing a snapshot of borrowing and repayment behavior. This information helps credit reporting agencies compile a comprehensive credit report, which lenders use to assess creditworthiness.

Understanding Tradelines

A tradeline represents a specific credit account, such as a credit card or loan. It reflects a borrower’s payment history, credit limit, and the age of the account. Credit reporting agencies, including Experian, Equifax, and TransUnion, receive regular updates from lenders, incorporating this credit activity into an individual’s credit file.

The concept of an “authorized user” is often associated with tradelines. An authorized user is an individual added to an existing credit account by the primary account holder. They gain access to the account for purchases but are not legally responsible for the debt. The primary account holder’s positive credit history, including on-time payments and low credit utilization, can then appear on the authorized user’s credit report, potentially benefiting them.

Legality of Purchasing Tradelines

Buying or selling authorized user tradelines is generally not illegal under federal law. No specific U.S. federal statutes explicitly prohibit this practice. Credit bureaus typically consider authorized user accounts legitimate entries on a credit report, provided they accurately reflect the authorized user status. Being added to an account as an authorized user, even for a fee, is not inherently against the law.

Potential legal issues arise not from the purchase itself, but from misrepresentation or fraudulent use of credit information. For instance, providing false information to a lender or credit bureau with intent to defraud, or using a purchased tradeline to create fake identities, could lead to serious legal consequences. Lenders may view attempts to misrepresent true creditworthiness as fraudulent. While acquiring an authorized user tradeline may be permissible, any financial conduct involving deception or fraud remains subject to legal penalties.

Lender and Credit Bureau Perspectives

Credit bureaus generally report authorized user accounts, and this information can appear on an individual’s credit report. However, credit scoring models, including FICO and VantageScore, may assign less weight to authorized user tradelines compared to accounts where an individual is the primary borrower and directly responsible for the debt. This is because authorized users do not bear the legal responsibility for payments.

Lenders, during their underwriting process, often look beyond a raw credit score to analyze the underlying credit report in detail. They may identify authorized user tradelines and consider their relevance to an applicant’s actual ability to manage debt. A credit profile heavily reliant on authorized user tradelines might be viewed with skepticism, as it may not fully reflect the applicant’s independent capacity to handle credit obligations. Some lenders may require additional documentation or discount these accounts entirely.

Establishing a Strong Credit History

Building a strong credit history involves demonstrating responsible financial behavior over time. One effective strategy is to open a secured credit card, which requires a refundable security deposit that typically sets the credit limit. Regular, on-time payments and low utilization on a secured card can help establish a positive payment history and improve credit scores.

Another method is obtaining a credit-builder loan, where the loan amount is held by the lender while the borrower makes regular payments. These on-time payments are reported to credit bureaus, contributing to a positive payment history. This approach helps build both credit and savings simultaneously.

Consistently making all payments on time is the most influential factor in credit scoring. Keeping credit utilization low also plays a substantial role in maintaining a healthy credit score. Additionally, maintaining a mix of credit types, such as installment loans and revolving credit, can positively influence a credit score, as can regularly checking credit reports for accuracy.