Could selling tradelines be a new income stream for you?
I’d heard whispers of this lucrative, relatively low time-investment side hustle, but never met anyone actually doing it.
That is, until I ran into Paul at FinCon. He said he started out skeptical, but had turned it into a $1000 a month income stream with very little work.
In this article, we’ll walk you through how tradeline selling works, the potential drawbacks, and how you can get started.
Zina Kumok contributed this piece. Zina is a personal finance freelance writer who paid off $28,000 worth of student loans in three years. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. She also provides financial coaching for one-on-one clients at Conscious Coins.
What is Tradeline Selling?
Tradeline selling is the act of adding a stranger as an authorized user on a credit card, allowing them to increase their credit score by “piggybacking” off your credit.
This “credit piggybacking” is an increasingly popular way to profit from your unused credit. By allowing someone with little or no credit history to build credit as an authorized user on your credit card, you can make money while barely having to lift a finger.
All of a sudden, your new authorized user will now show thousands of extra dollars of “available credit” on their credit report. This can help them qualify for loans, rebuild credit scores, or get lower interest rates.
Buying a tradeline isn’t cheap, with consumers paying as much as $1,000 for the privilege. While that may seem steep, a borrower who secures a low interest rate on a loan may save thousands or even tens of thousands in interest over the lifetime of the loan. That’s not even mentioning the less tangible benefits of a higher credit score, like an increased chance of having a rental application accepted or the ability to apply for jobs that require a credit check.
And as the tradeline seller, you have the physical card mailed to you to prevent fraud or mis-use.
Adding Authorized Users: The Intent
Parents with high credit scores often add their children as authorized users on their account. This gives the child their first credit experience and helps them build the foundation for a strong credit history — especially if the account has been in good standing for several years.
The bank doesn’t mind if you add your spouse or child as an authorized user on a traditional card or an employee as an authorized user on a business card, but they likely never anticipated this perk being sold as a commodity to strangers.
As a side hustle, selling tradelines is a brave new frontier, and it remains to be seen if lenders and credit reporting agencies will continue to tacitly endorse the practice.
How Much Can You Make Selling Tradelines?
For someone with solid credit, selling tradelines can be incredibly lucrative. Paul Thompson of the What’s Up Next podcast makes $1,000 a month selling tradelines on his personal and business credit cards.
The amount you can earn per tradeline varies. Some experts say you can earn between $125 to $275 per tradeline.
Tradeline Supply Company, a reputable broker, says you can make between $50 to $350 for each authorized user.
That rate depends on the age of the card and the credit limit. The older the card, the more you can earn because older cards provide a bigger boost to a credit score.
A higher credit limit indicates to potential lenders that the authorized user access to a lot of money and can spend it responsibly.
Selling Tradelines FAQs
It sounds too good to be true, but you can make real money selling tradelines. There are some risks involved, so make sure you understand the ins and outs before signing up.
Where Can I Sell Tradelines?
Tradeline Supply Company is one of the most reputable tradeline companies, as well as Thompson’s top recommendation. He was able to visit their headquarters in San Diego to meet them in person, and he’s heard good things from others in the personal finance space.
“They just seem to be the most reputable around,” he said.
How Much Time Does Selling Tradelines Take?
Selling tradelines is a popular side hustle because it doesn’t take more than a couple of hours a month. It’s a much more efficient way to make money compared to driving for Lyft or delivering food for DoorDash.
Thompson’s tradeline broker notifies him when they have an applicant, and Thomson then contacts his credit card company to add them as an authorized user. He can usually do this online, but sometimes he has to call the credit card provider directly.
“The order itself literally takes five minutes,” he said.
Thompson said these companies prefer you respond to inquiries within a few hours, and because adding an authorized user takes so little time, it always makes sense to do it quickly.
When it’s time to remove the authorized user, Thomson usually has to call and remove them over the phone because only the primary cardholder can remove an authorized user.
(If your wife has an authorized user on her account, for instance, you can’t call the credit card provider yourself.)
Can My Spouse and I Both Sell Tradelines?
Unlike traditional loans, a credit card usually only has one primary cardholder. If your spouse is the primary cardholder, they can sell tradelines on their cards. If you’re the primary cardholder on your cards, you can sell tradelines as well.
In other words, couples can both earn money doing this. Paul’s $1000 a month included selling tradelines on both his and his wife’s accounts.
Can I Do This With Personal and Business Credit Cards?
You can sell tradelines on both your personal and business credit cards.
It’s not clear if you make more money selling a tradeline on a personal or business card, and the answer may have more to do with the individual account holder than the type of card.
What are the Risks of Selling Tradelines?
When you think about making extra money, there’s usually a sacrifice involved. Whether you’re giving up your time or your possessions, a side hustle almost inevitably requires you to trade something precious for a little extra income.
But the best hustles require the least effort on the part of the hustler. When you can draw on the value you’ve built from past hard work, you can start bringing in almost passive income, without sacrificing much at all.
So what’s the catch?
Data Breaches and Unauthorized Purchases
In a time when data breaches are common, selling tradelines may seem like an easy way to get hacked. Thompson said there is potential for the authorized user to request an actual physical card. If they get a physical card, they can make purchases you’ll be on the hook for paying.
He recommended calling each credit card provider you’re selling tradelines with and setting up two-factor authorization. This way you’ll be contacted personally if an authorized user tries to order a card for the account or access personal information.
When you add the authorized user, the credit card company will ask where to send the new card. Have it sent to your address and store it somewhere safe.
Getting Accounts Shut Down
Credit card companies reserve the right to cancel a card if you add too many authorized users, and different card providers may have different policies regarding the practice.
“I have heard from friends who were also (selling tradelines), that Bank of America does not like this,” Thompson said. “And they have shut down their cards.”
If a long-standing credit card is canceled, your credit score may take a dip because the average credit age would decrease. Thompson said this is one of the only ways that selling tradelines can negatively affect your credit score.
Does Selling Tradelines Affect Your Credit Score?
When done right, selling tradelines should almost never impact your credit score. Because the tradeline recipient never actually gets access to your credit card, they can’t run up a balance without your knowledge.
Still, you should avoid selling tradelines if you’re about to apply for a mortgage or business loan. Banks may close a card with too many authorized users, and that can affect your score as your available credit will go down and naturally your utilization will go up. If a long-standing card is closed shortly before you apply, your credit score could take a small dip.
The likelihood of a card being closed is minimal, but it’s still best to wait until after you’ve secured the loan. The money you can earn from selling tradelines is nothing to sniff at, but it’s not enough to risk jeopardizing the eligibility of your loan application.
Can You Earn Credit Card Rewards Selling Tradelines?
Because the tradeline buyer doesn’t get access to your credit card, they can’t make purchases on it.
This means you won’t earn any extra rewards, points or miles by selling a tradeline. It also means you won’t have to worry about someone unexpectedly charging a major purchase to your card!
Is Selling Tradelines Legal?
Selling tradelines is legal — for now — but it may violate your credit card provider’s terms and conditions.
It may be a good idea to only sell tradelines on one or two cards, avoiding your oldest and most important card. You don’t want to risk having all your old credit cards closed because of selling tradelines.
Thankfully, when a credit card provider closes an account, it doesn’t show that your card was closed because of too many authorized users. It will just state that it was closed without a specific reason.
When and How Do I Get Paid?
Most tradeline companies will pay you when the deal is concluded, after which you can remove the authorized user from your credit card. This is usually two months after you add them.
Every broker has its own policy, but Tradeline Supply Company sends an email notifying that you’ve earned a commission and can remove the authorized user from your account.
They pay via check or direct deposit, depending on your preference, and payment is sent within three to four days.
Do You Have to Pay Taxes on Income from Selling Tradelines?
Making money by selling tradelines is a form of income, so the tradeline broker will send you a 1099 tax form. That’s the same form you’d get from renting out your house on Airbnb or driving for Uber.
You’ll have to report this form on your taxes. You may only get a 1099 if you’ve made more than $600 in a calendar year from one company.
The tax implications depend on the total earnings and your personal tax rate. A good rule of thumb is to save between 25-30% of all tradeline income for tax time. If you make $1,000 a month like Thompson, you should set aside between $250 and $300 a month.
Open a separate savings account and transfer the money there every month. If you have a regular 9-5 job, you can increase the withholding on your W4 to pay taxes directly to the government.
Because there are no major expenses associated with selling tradelines, there are no deductions you can take to decrease the taxable income.
One way to decrease your tax liability is to take your earnings and contribute to a traditional IRA, traditional 401(k) or Health Savings Account (HSA). You can deduct contributions to those three accounts on your taxes, which can offset any tradeline income.
For a more specific answer, contact an accountant to see how much you would need to contribute to minimize your tax balance.
How Can I Get Started Selling Tradelines?
In general, a card needs to be open for at least two years to qualify for tradeline selling. Anyone with good financial habits should find their tradeline eligibility greenlit in no time.
A broker like Tradeline Supply Company may reject your application if your credit card is too recent or the credit limit is too low. You can fix the latter by calling the credit card provider and asking them to increase the credit limit. This may count as a hard inquiry on your credit report, so don’t request a limit increase if you’re looking to apply for another line of credit soon.
If your credit history is too new to qualify, make a note in your calendar to apply again in six months.
Selling Tradelines Alternatives
Selling tradelines is certainly an interesting way for people with good credit history to pad their bottom line. But if you don’t qualify or can’t quite stomach the risks involved, you’ve got other options.
If you’re after passive cash flow, you might consider adding some alternative investments.
Companies like Fundrise allow you to invest in a diversified portfolio of professionally-vetted and managed commercial real estate properties. This spreads your risk around to a range of properties in multiple geographical locations–with really low minimum investments.
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One big drawback to selling tradelines is you’re limited in how much you can earn. It’s probably never going to turn into a full-time income.
What do you think of the selling tradelines side hustle? Did Paul convince you to give it a shot?
Let me know in the comments below.