Perhaps you’re interested in exchanging tradelines. Or you’ve only just learned about tradelines. Either way, you’re probably wondering, “Are tradelines legal?”
There is a short answer to this question: They are legal unless they are purchased unethically. Then, tradelines are illegal.
As you can imagine, this answer is a little confusing. That’s because tradelines themselves are very simple, but sorting out how to deal in this business ethically can be complicated. But rest assured that we are here to help! In this article, we’ll share what you need to know about tradelines and when purchases of tradelines are legal.
A Brief Definition of Tradelines vs. the Industry
When discussing the legality of tradelines, it can be confusing if you don’t understand the difference between two separate things: tradelines and the tradelines business. How can these two things be so different? Here’s what you should know.
Tradelines are accounts that appear on your credit report. These accounts show that you have access to credit and also demonstrate how you treat that credit. For example: do you pay your minimum payments on time? Do you have a desirable credit utilization ratio? How large are your loans or credit limit that lenders entrusted to you?
These accounts are always legal. In fact, they are essentially required to build or repair your credit.
The tradelines business is an industry designed to allow people to share, exchange, buy, or sell ownership of an account. When done correctly, this is usually conducted with authorized users. For example, when someone is seeking to improve their credit can be added in name to an existing account to help their score.
However, some practices in the tradelines business can be quite fraudulent or even a complete scam. In this case, the answer to “are tradelines illegal?” is yes. However, when you participate in a fraudulent purchasing scheme, this is illegal.
But not all the tradelines business is fraudulent. So how can you engage in the industry legally?
The Decision on the Question: Are Tradelines Legal?
In 2008, one corporation, the Fair Isaac Corp., complained that people were “abusing” the authorized user system. However, congress disagreed. They said that under the Equal Credit Opportunity Act, to deny authorized users was a form of discrimination.
This decision reinforced the idea that people could become authorized users on existing credit accounts. By using their name on another account, their credit score would be affected by that tradeline. So when an account is good with on-time payments, no defaults, and a long history, an authorized user can benefit from it.
This kept the opportunity open not only to friends and family members but anyone the account holder approves. So, if an account holder agrees to have an authorized user, it is legal.
This meant that supply companies could create the bridge between those seeking to improve their credit and people with good accounts seeking to profit from their good credit history. This also means that the answer to “are tradelines legal?” became a resounding yes!
Authorized Users or “Piggybacking Credit”
Being an authorized user is also known as piggybacking credit. This is because an authorized user benefits from all the good things of having a good tradeline without actually participating in keeping that account in good standing.
An authorized user can use a Tradeline Supply Company to join a good account without needing to:
- Have good credit that’s necessary to open the account, or
- Make payments on the account.
It is important to note that authorized users do not have access to that line of credit when added through a supply company. They only gain the benefits for their report and score.
In fact, according to the Federal Reserve, piggybacking as an authorized user can have moderate to high benefits for people’s credit scores. According to their findings, those with less history can enjoy a significant boost to their credit scores. But even those with bad credit can benefit from a moderate boost per tradeline.
This may all seem too good to be true, but believe it. Piggybacking is not only legal but extremely common. For 1 in 4 Americans, their first credit history is from being an authorized user. This is because parents will often add their children to help them establish credit.
Becoming an authorized user on an account in good standing is a legal and ethical way to build and repair a credit score. This is usually done by a customer paying a supply company to be added, and a commission is then sent to the account’s primary owner.
Making Credit Accessible to All
Some children have very easy access to someone with good credit. If their parent has tradelines in good standing, they can add their children in a moment. Suddenly, their teenager is building credit without lifting a finger.
While this is great for those kids, it’s a simple fact that not everyone is so fortunate. In fact, a third of Americans have fair or poor credit and couldn’t offer good credit history to their children if they wanted to. So should people without easy access not be able to build good credit?
Credit is hard to build without credit already. This is why having tradelines for sale is a way of leveling the playing field for all. By simply purchasing the right to be an authorized user, you can start building your own credit.
Unethical Tradeline Exchanges
So as we’ve mentioned, the question of “are tradelines legal” can be answered with a yes as long as you’re using reliable tradeline companies to become an authorized user. However, there are other ways of purchasing full or partial ownership of these accounts that are
Many fraudulent companies claim they can quickly boost your credit and will make a variety of sales pitches to convince you that this kind of purchasing is legal.
Here are the red flags to know when are tradelines illegal:
- Companies may tell you that a Credit Privacy Number is a way to hide a bad credit history or bankruptcy. In reality, these are usually just someone else’s SSN, and the “company” is implicating you in identity theft.
- Buying an account in default. This will make you the primary owner but the owner of an account that is in default. This may actually hurt your credit and be a waste of your money.
- Address merging. A company may tell you that this is necessary to join an account as an authorized user. But this is committing fraud, and tell you this is not a reputable company.
Always be diligent, and only work with reliable supply companies, so you can ensure that you purchase only tradelines that are legal.
So, Are Tradelines Legal or Illegal?
While tradelines are legal, it also depends on how and with what company you do business. That’s because there are illegal tradelines through disreputable companies that are selling scams.
However, as long as you go the route of an authorized user with reliable, trustworthy supply companies, you can rest assured that this is a legal and beneficial practice for boosting your credit.