What are Positive and Negative Trade lines?

Published: 18th April 2009
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Before I explain what a positive or negative trade line is let me first explain a trade line. This information can be important if you are trying to repair credit reports. A trade line is any credit account reporting on your credit report. Trade lines can be revolving credit card accounts or an installment loan. Some examples of trade lines are: your mortgage loan, your car loan, any credit card, etc. In general, these accounts listed on your credit reports help you build your credit and your credit score, as long as you make your payments on time. As you make your payments on time your trade line reports as a positive trade line. Once you miss a payment or make a payment late the trade line becomes negative.

As a consumer it is important to know which accounts are reporting as positive trade lines and which accounts are reporting as negative trade lines. It is important to know this information because it shows how responsible you are with your credit. By understanding each account and all of its information you will understand more about your credit scores and how each account factors into your credit score.

Once you make a late payment on a trade line it becomes a negative trade line and starts lowering your credit score. The first time a payment is late it can lower your credit score up to 40 points, sometimes more. Every trade line you have factors into your credit score that way. Having a car repossessed or an account go to collections can cost you up to 100 points. Now, the good news is that as these accounts get older they stop affecting your credit score so much. Inquiries even lower your credit score up to 5 points. Every time you apply for credit and they pull your report it shows up as an inquiry on your report. However, you can pull your own credit reports as much as you want.

This is where having the information about trade lines will help you. There are five categories that factor into your credit score. Each account and all of its information can be divided up into the five categories, which will either help to raise your credit score or lower it. Since your credit score was designed to tell lenders how much of a risk you are, the higher your credit score the better. The five categories are: Payment History (35%), Amounts Owed (30%), Length of Credit History (15%), Types of Credit in Use (10%), and New Credit (10%). By reviewing your accounts you will be able to see what you need to do on each account to help increase your credit score. Here are a few tips:

Payment History (35%) - the longer your payment history the better, so only close accounts you do not or will not be using any more

Amounts Owed (30%) - keeping your balances at 50% of the line of credit or lower

Length of Credit History (15%) - the longer your credit history the better, so only close accounts that you will not be using any more

Types of Credit in Use (10%) - you want to have different types of credit, so it is good to have a couple credit cards, a mortgage loan, and a car loan

New Credit (10%) - any new credit that you opened- this affects you because lenders don't want to give credit to someone that is over extended

Now, that you know about your trade lines and some tips for your credit score you should have a better understanding of the information on your credit reports .



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