Adding Credit Tradelines To Increase Scores To Qualify For Mortgage

This Article Is About Adding Credit Tradelines To Increase Scores To Qualify For Mortgage

Credit tradelines are creditors who report consumer credit and payment history to the credit bureaus. Lenders consider a credit tradeline as a credit account consumers have established with a creditor. The creditor has reported it to the credit reporting agencies for at least 12 months to be considered a credit tradeline. Most lenders will require three credit tradelines seasoned 12 to 24 months. Some lenders will require credit tradelines that have been seasoned at least 24 months.

Credit tradelines required by lenders are not agency mortgage guidelines. FHA, VA, USDA, Fannie Mae, Freddie Mac does not require a number of credit tradeline requirements. It is up to the individual mortgage lender whether or not credit tradelines and the number of tradelines required. Tradeline requirements are lender overlays by individual lenders.

Typical And Common Traditional Credit Tradelines 

Example of credit tradelines includes the following:

  • Revolving credit accounts
  • Auto loans
  • Student loans
  • Other creditors who report the debtor’s credit payment history to the three credit reporting agencies for at least 12 months
  • These credit tradelines are often referred to as traditional credit tradelines
  • Creditors such as utilities, auto insurance, medical insurance, and landlord payments are often referred to as non-traditional credit tradelines
  • This because these creditors do not report them to the credit reporting agencies

The three giant credit reporting agencies are the following:

Why Are Credit Tradelines Important To Lenders?

Credit tradelines are very important and lenders look at credit tradelines as a reflection of borrower’s previous payment habits and future payment risk.

  • The longer the credit tradeline is, the more weight it has for the lender
  • Lenders look at payment history very seriously
  • Will view a borrower who has a long history of timely payment history as a good risk
  • Will view past payment history as a reflection of future payment likelihood
  • Although FHA, Fannie Mae, Freddie Mac, VA, USDA may not require credit tradelines, many lenders may have overlays on the number of minimum credit tradelines required
  • Some even require a 24-month seasoning requirement versus a 12-month seasoning requirement

Again, it is up to the individual mortgage lender to require the number of credit tradelines from borrowers.

How Can You Add Tradelines To Your Credit Report?

Tradelines will definitely boost credit scores, especially an aged credit tradeline.

  • There are consumers with no credit and no active collection accounts who have low credit scores due to not having any credit
  • For example, for consumers with a bunch of closed out credit account with no credit for the past few years, the chances are they will have lower credit scores
  • If credit scores are very low, do not apply for any unsecured credit cards
  • This because consumers normally need a credit score of 700 to get approved for an unsecured credit card
  • The best way to developing a credit tradeline on the credit report with a low credit score and no credit is by getting a few secured credit cards
  • Each secured credit card will boost credit scores
  • As secured credit cards ages, credit profile will become stronger and stronger
  • Eventually, the secured credit card company will grant a higher credit limit without asking cardholder to put any additional funds

Secured credit cards can eventually become unsecured credit cards and cardholders will start developing a good credit profile.

Authorized User On Somebody’s Credit Card Account

One late payment from the main borrower will also plummet the authorized user's credit scores.

Another way of developing an instant credit tradeline on the credit reports is by adding yourself to a family member’s, relatives’, or friend’s credit card as an authorized user. However, there is a risk with doing this. Need to make sure that the main credit card holder has an impeccable payment history. Equally important is that they have a low credit card balance. Adding yourself on as an authorized credit card user with someone with an excellent payment history can work if the authorized user has the same last name and/or billing address. However, if credit cards maxed out, this will hurt authorized user more than it will help. There are so many cases where I get borrowers who are authorized users on a credit card but the main borrower of the credit card has maxed out credit cards. I often need to request them to remove themselves out as authorized users due to maxed-out credit cards or prior late payments. One late payment from the main borrower will also plummet the authorized user’s credit scores.

Buying Tradelines

There are many credit consulting and credit repair companies that sell credit tradelines.  What these companies are doing is adding the customer as authorized users to their credit card accounts with high credit limits and low credit card balances in order to show credit tradeline payment history. They do this with the hope of boosting the consumer’s credit scores. These companies are not cheap. I suggest that consumers do proper due diligence before they spend their hard-earned money on buying tradelines from these companies. Often times, if an authorized user does not have the same last name as the main user and/or does not have the same address, adding credit tradelines does not work. Borrowers can still get an approve/eligible per automated underwriting system (AUS) with little to no tradelines. However, lenders can require tradelines from borrowers as part of their lender overlays. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans.  GCA Mortgage Group has zero lender overlays. We just go off the automated findings of the automated underwriting system (AUS). 

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