Seasoned trade line

Aseasoned trade line is a line of credit that the borrowerhas held open in good standing for a long period of time,typically at least 2 years. A controversial practice involvingseasoned trade lines, sometimes called piggybacking, usesa creditworthy borrower's accounts to improve the credit ratingof an unrelated third party.

The creditworthy borrower adds the third party as an authorized userof his lines of credit, but does not actually provide the third partywith materials (credit cards, account numbers, etc.) that would permitthe third party to make charges against that account. Thebenefit to the third party is an improvement in their personal creditrating—they now appear to have a long and favorable credit history,and their credit score increases. This makes the third party looklike a better credit risk, andimproves the third party's access to new credit. If the third party isdealing with a lender who uses risk-based pricing, then theirartificially inflated credit score may translate into a substantiallylower interest rate.

The third party pays money in exchange for this service, typicallybetween $500 and $2000, depending on the age and quality of thetrade lines. The creditworthy borrower gets a portion of this,typically between $100 and $150, while the broker who sets up thedeal keeps the rest.

The risk to the "donor" is that the other person might actually makecharges againstthe account, and not pay it back. The brokers who providethis service claim that they do not reveal the entire account number tothe recipient, or do not themselves have access to the account number. It is possible a recipient might learn the account number in some otherway, for example if it appears on his own credit report. However, this is often insufficient information to make use of the account - a PIN, expiration date, or security code is typically also required. These measures further lower the risk to the "donor".

Legality

FTC spokesman Frank Dorman said: "What I've gathered from attorneys here is that it is legal , however, the agency is not saying that it is legal technically." [http://www.timesrecordnews.com/trn/gabriels/article/0,2586,TRN_20347_5583896,00.html]

If a contract requires the borrower to disclose pertinent facts relating to his ability to pay back a loan, and the borrower does not do so, then this practice may constitute fraud.Fact|date=August 2008

With FICO 08 on the horizon many brokers who used to add “authorized users” to existing credit card accounts have switched to brokering “Seasoned Primary" accounts. A “primary” account is an account in the borrower's own name. This practice is not yet tested in the courts as the lender now has no way of telling your real credit from that of the former owner who had “seasoned the account”. With an authorized user account the credit report clearly marks the account as authorized user, this new practice however the lender is not alerted to the true status of the account history. One case has been filed in Federal Court Case CV-08-0694 John Bronson Vs. TradeLine Solutions, Inc. TradeLineSolutions.com, Ted Stearns, April Richards and others.

American Lives Destroyed "The Credit Bureau Nightmare and How to wakeup from it" Written by Martin Pelmore touches on the subject of Trade lines and the whole Credit repair industry.

Industry effects

Fair Isaac, the creator of the widely used FICO score, announced in 2007that they would no longer consider accounts on which the borrower is anauthorized user. These changes would take effect in September2007. [http://www.bankrate.com/brm/news/credit-scoring/20070609_piggyback_credit_score_a1.asp] However, as of February 2008 this change had not yet been rolled out and Authorized user accounts still affected credit scores.Fact|date=February 2008

Implementation of this change would stop the practice of piggybacking. It would also decrease thecredit scores of borrowers such as children or spouses that arelegitimate authorized users of another person's credit lines.Because of the Fair Credit Reporting Act and privacy laws,there is no way for a lender to be able to tell who the other party of anauthorized account is, and thus no way to distinguish legitimate usefrom fraud.Fact|date=September 2007

References

*cite web | first = Terry | last = Savage | publisher =
TheStreet.com | date = 2007-03-11 | title = The Savage Truth: Seasoned Credit Lines | url =http://www.thestreet.com/_tscrss/newsanalysis/opinion/10342802.html | accessdate = 2007-03-23
* [http://www.usatoday.com/money/economy/2007-06-03-3595595170_x.htm 'Piggybacking' roils credit industry]