How to Build a Credit Profile through Tradeline

What is tradeline credit? It is a type of business credit that can be used to show your business’s financial reliability. A tradeline account allows you to borrow money from the company for which you are an authorized user, and then pay it back at a later date with interest. Tradeline accounts can help lend credibility to new businesses, as well as help increase scores on existing tradelines. Learn how tradeline credit works in this post!

What is a tradeline

A tradeline is any credit card or loan on which the borrower agrees to pay no interest for a specified number of months. They can be used as incentives by banks and other financial agencies to entice people into new lines of credit with them. Tradelines are often used as security for loans or mortgages, making it easier to qualify for financing because they help improve your debt-to-income ratio (DTI). And speaking of improving your DTI, you should stick with tradelines like 0% APR cards, rather than ones marked “no interest”, because one way these types of cards can make up the difference is by charging annual fees.

Why you need to build your credit profile

Credit is a resource in which you can borrow money in the future. So by establishing credit, you are essentially lending your good credit to yourself. You might be tempted to use someone else’s credit, but if they ever do something against you, this could result in problems with your own credit history. Your existing tradelines are analyzed when you apply for new ones. Establishing tradeline patterns for all three types of account is enough to give creditors confidence that their risk is low within each category of account when issuing the loan or line of credit that customer has requested.

The three types of tradelines available

The three main types of tradelines are:

• Homeowner and non-owner (consumer) tradelines. A home mortgage, automobile or other secured loan is needed for the person borrowing to use as collateral for the credit card account.

• Unsecured credit cards offer no collateral, but do an inquiry on your credit report before you’re approved.

• Secured cards require a refundable cash deposit also used as collateral that gets put onto a revolving line of credit before being lent out depending on what the borrower needs at the time. This option is similar to a home equity line of credit, which requires property as security against a loan with high interest rates.

How to get a good credit score

Pay your credit card bills on time.

Use less of your available credit limit to have a lower ratio of credit utilization.

Make payments for large purchases within the month in which they are due – this will help you build up payment history.

Keep an eye on your account balances, if one is too high it may be worth transferring or combining balances to keep them low. You can do this year round, but monthly is best so that if there are any changes in rates they won’t affect all cards at once.

Steps for building your credit profile with tradelines 

1) Obtain a credit card from a traditional lender, preferably with a low limit.

2) Payback the balance in full at least 3 months before the due date every month.

3) Continue this for 18-24 months until you have established a good reputation as a borrower and your credit score has increased to an optimum level.

4) Apply for new tradelines, such as secured cards or department store cards that offer promotional rates of 0% APR for 1 year than cash advances from that point on. Be sure to read all the fine print! Sometimes these changes will be painful even if you don’t intend them to be.

5) You will need a good balance in available funds to cover monthly minimum payments on new tradelines while old tradelines begin to pay off if you try using them as well. This means you may see some higher interest rates next month or two because of a lack of experience with loans or lines of credit while they still accumulate on the new ones.