Why It's a Bad Idea to Buy Tradelines For Business, and What to Do Instead

9 min read
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Executive Summary

You can "buy" certain tradelines to help you get started, but not all tradeline purchases are created equal. In fact, buying the "wrong" types tradelines can be a red flag for lenders. We're going to dive into what all that means, and how to build business credit the right way.

Disclaimer: Our first priority is giving you the best financial advice for your business. Tillful may receive compensation from our partners, but that doesn’t affect our editors’ opinions or recommendations in the content on our website. Editorial note

🎉 Tillful is now part of Nav! Learn about business tradelines at Nav

First: What are tradelines for business? 

A tradeline or trade information refers to the financial obligations that a business has to its creditors, suppliers, service providers, and other vendors that involve payment terms. Simply put, tradelines are any account that appears on your credit reports and includes information about the creditor and their debt. Tradelines in a business credit sense differ from personal credit tradelines in that they can comprise more types of accounts and credit. While there are only two categories of tradelines that appear on personal credit reports (revolving tradelines and installment tradelines), there are five that can appear on your business credit report, according to Experian.

Financial loan, line, lease, credit card
Supply raw materials, building supply, office
Services accounting, marketing, financial services
Utilities telecommunications, gas, water, electricity
Transportation ground, air transport

Source: Experian

💡 Alternatives to buying tradelines:

  1. Ask your vendors to report payments
  2. Get an alternative credit tradeline
  3. Get a secured credit card

How do tradelines work?

Your business credit report consists of tradelines. They’re the backbone of your credit score.

In order to more accurately judge your creditworthiness, lenders may look beyond your credit score to check the open accounts on your credit report and gather more information. The information available can include the creditor or lender’s name, current balance, credit limit or loan amount, type of credit, payment history, amount of the last payment, and current account status.

Business credit reports tend to be more detailed than personal credit reports so that lenders and creditors can better assess your creditworthiness. Whereas consumer credit reports will simply take into account credit utilization, business credit reports will list out credit utilization by tradeline and by month. Dun and Bradstreet will even report on how fast you pay your outstanding balances in their Paydex score. This way lenders can more accurately see your financial profile. For example, if your utilization ratio was high for one month, but stayed reasonable for other months, or got paid off quickly, then it would be less of a red flag for a potential creditor.

In most cases, you will not be able to have a credit score unless you have at least 1-3 tradelines that have been open for at least 6 months and are reporting to the credit bureaus. If you have an outstanding loan, for example, but it’s not reporting to the bureaus, then it won’t count towards your business credit.

Getting reporting tradelines from vendors and/or financial institutions, then, is the way that you establish and start to build business credit. There are quite a few people and companies out there who offer tradelines — some legit, and some not so much. Dipping your toes into buying tradelines has the potential to lead you into some grey area. Be diligent and do your research before choosing to work with a company that sells tradelines.

Alternative credit tradelines: the ones that good to “buy”

With the rise of alternative credit, many companies are starting to offer subscriptions or other services that add tradelines to your report. Some of these companies allow you to report your phone or utility bills as tradelines in exchange for a fee. Others let you subscribe to a service, and report the payments as a tradeline. Companies that provide services like these include:

  • eCredable
  • Nav

These types of tradeline services are ideal for newer and thin-file business owners. They’re a good way to get started, and what they are reporting is fully tied to your business and entirely within your control. An important distinction to make is that you aren’t exactly buying the tradeline; rather, your payments are what creates the tradeline. We know this sounds very subtle, and we’ll work to make this clearer in the later sections.

PS - Tillful currently has a credit builder product in closed beta for score holders. Learn more about the score here and sign up for free here.

The types of tradelines you shouldn’t buy

Buying the “wrong” type of tradelines is not only frowned upon by lenders, but is unethical and could have legal repercussions, for example, by being categorized as bank fraud.

One known practice is known as ‘piggybacking’ tradelines. Companies that offer a ‘piggybacking’ service will have creditworthy cardholders or “shelf companies” at their disposal. In order to piggyback, you would have to pay a fee to be added as an authorized user to the established tradelines. Alternatively, you could be added to a tradeline on a shelf company that essentially only exists for the purposes of selling its “credit history.” The "seasoned tradelines" would then show up on your report for some time and boost your business credit score.

Because your business didn’t earn those tradelines, it could be seen as misleading to have those on your credit report, and you risk entering shaky ground.

Why you shouldn’t pay to be added to a tradeline to build your business credit

It’s not advised to pay to be added to a tradeline, because the tradeline is not under your control. Sometimes accounts are stolen, from persons dead or alive, or use synthesized identities. Not only that, but purchasing tradelines with the intent to deceive lenders is not exactly best practice; it could even be considered fraud. If your account is associated with a suspicious tradeline, your credit profile could be red-flagged and potentially shut down. All this trouble doesn’t come cheap either — fees to purchase tradelines could range from $500 to $2000.

The major credit bureaus are keenly aware of such credit-boosting schemes, as are lenders. Consumer credit bureaus have been fine tuning credit scoring models in order to limit the impact of authorized user tradelines. Though there appears to be less activity around preventing business credit fraud, it does seem that lenders, who review your credit and business profiles carefully before deciding whether to extend credit, can often spot the difference between tradelines you opened yourself, and those you paid for.

That said, even if you are able to legally associate yourself as an authorized user to a trusted family member or friend’s business tradeline, it may still not be the best way to build your business credit. As an authorized user, you won’t have any control over the tradeline holder’s behavior. If the primary cardholder or person associated with the tradeline has a high utilization rate or drops out of good standing, these behaviors will negatively impact your credit score.

What you should do instead of buying tradelines to build credit

Buying tradelines to artificially boost your business credit will most likely catch up to you, whether now or in the future. Although such shortcuts can be tempting, it could backfire tremendously and ruin your credit profile, not to mention your reputation with lenders, which are (almost) everything in small business lending.

Instead, we encourage you to kickstart your business’s credit history on your own terms to lay the foundation for a better business credit score. It does take a little extra work, but you can rest assured that you’d be building credit the right way. Here are some ways you can get started.

Open your own tradeline

For one, you could open your own tradeline with a company. Why not take that $2,000 and invest it in a vendor relationship? There are likely many services and/or products that you use to run your business. Between supplies, services, utilities, and transportation, identify your current vendors and see if they would report to the credit bureaus. It is a bit of a manual process, but once you have six months of credit history under your belt, your options really start to open up.

The alternative credit tradelines that we discussed earlier fall under this category as well.

Get started with our top 10 picks for store cards

Ask existing vendors to report to the credit bureaus

If you already work with a vendor or supplier on a regular basis, try leveraging that relationship to help you build credit history. To set up a tradeline, you’ll need to get on payment terms and to have the company report to the credit bureaus. Plenty of vendors and suppliers will report your payments to the credit bureaus if you ask. Again, this is a manual process, but the pain is temporary and the payoff is well worth it.

Apply for a secured credit card

One challenge with vendor tradelines is that they need to stay open, otherwise they fall off your credit report. That means that if you end up wanting to switch vendors, your tradeline would close, potentially decreasing your credit history. A good alternative to consider, that doesn’t require you to stay with a vendor to keep your tradeline open, would be to open a secured credit card.

This type of business credit card requires you to deposit money with the credit card company and you are able to make charges on the secured card up to the amount you have deposited. They usually don’t require a good credit score, as the deposit serves as a safeguard against potential default. Bank of America has a secured credit card option, with a minimum deposit of $1,000. And of course, we’d be remiss if we didn’t mention the Tillful Card, that has a $500 minimum.

A secured business credit card works the same as an unsecured one (one that doesn’t require a deposit), and often, the credit card provider will allow you to upgrade to an unsecured line of credit once you demonstrate responsible use. Make sure you pay your bills on time to keep your credit card account in good standing! Most secured credit card providers report to the credit bureaus, but just be sure to check before you apply.

Get started with our top picks for no-credit business credit cards

Last word on buying tradelines to build business credit

Slow and steady wins the race, and so it goes with building business credit. Avoid taking shortcuts such as buying authorized user spots on tradelines. Instead, invest that money you would have spent in legitimate alternative credit solutions, vendor accounts, secured credit cards, and of course, your business activities! Our take on buying tradelines to boost business credit is that the potential to raise red flags with lenders is too much of a risk. With time and consistent effort, an excellent business credit score that wins you business funding is within reach.

Keep learning about business credit

The ultimate guide to business credit scores

How to establish a credit file for your business

How banks and lenders assess your credit

About the author

Ken So

Written by Ken So

Ken is the Founder and CEO of Flowcast and Tillful. Having spent most of his career before Tillful in tech and investment banking, he covers all things business credit and finance with a twist of insider knowledge.

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