If you apply for a loan you can be denied credit based on your credit report. One of the factors considered when deciding to extend credit is the number of trade lines on your credit report. A trade line is how a creditor that has approved you for credit reports your information to the credit reporting agencies. The components of a trade line include the name of the creditor, the amount borrowed, the credit limit, date last paid, the credit rating, the high credit amount and the type of account such as revolving or installment.
Trade Lines
If you apply for credit and you only have one trade line on your credit file, there is a good chance that your request will be denied. The reason used by the creditor will be insufficient trade lines reporting on the bureau. Your credit file does not have enough established credit for the creditor to approve you. In other words you don't have enough of an established credit file. A creditor will need to see how you pay over an extended period of time in order for him to evaluate you for credit.
Insufficient Credit History
Insufficient trade lines can also fall in the category of insufficient credit history. Creditors want your credit profile to include different types of trade lines such as credit cards, and installment loans such as mortgage and auto loans. This also helps to improve your creditor score. If your credit file consists of one credit card trade line or one auto loan trade line you will probably be rejected for insufficient trade lines, especially if you have had these accounts for less than one year.
Credit File
Once you have started your credit file you might want to take a look at your credit report every six months to see what information is being reported. If you have credit with a creditor and they are not reporting that information to the credit reporting agencies, put in a request to have it reported. Eventually your credit file will be sufficient for creditors to consider when making credit decisions. The more trade lines you have the better. Just be sure that you watch how you use your credit. Don't start using an excessive amount of credit because this can lower your score even if you pay on time.
Credit Reporting Agencies
The three major credit reporting agencies are Equifax, TransUnion and Experian. Information showing up in the files of one credit reporting agency might not show up on another. It's a good idea to take a look at your credit report at least once a year to confirm all of the information is being reported. Keeping an eye on your credit report can help you avoid problems later on.
Free Report
You can order your credit report online (see References). This is the only place that is established for you to get a free credit report. There are other locations that claim to be free but they will either charge a fee or request that you buy a product or service. You can get your report for free. Order a report from all three credit reporting agencies at the same time, or individually.
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