Does Investing Affect Your Credit Score | Chase (2024)

Investing is a great way to make your money work for you, but it always involves some level of risk. While there's always a possibility of adding revenue, there is also a very real chance of losing money along the way, whether that is through the stock market or another type of investment. Given this unpredictability, you might be wondering how much, if any, will investing affect your credit score.

In this article, you will learn:

  • If investments affect your credit score
  • If buying or selling stocks affect your credit score
  • What a margin account is and how it can affect your credit score
  • What to focus on when building credit

Does opening an investment account affect your credit score?

Investments encompass a wide range of mediums, which can include real estate, art, investing in a small business. They can also be the financial investments you make duringyour day-to-day, such as savings accounts, a 401(k), stocks, bonds, mutual funds and more.

Generally, investments do not directly affect your credit score. In fact, they may not appear on your credit report. However, like many other financial decisions you may make, they can indirectly affect your score.

Investments can indirectly impact your credit score

For example, if you aren't careful, and put too much of your income towards investing, you could risk losing your funds to the point where you can no longer make other important payments (such as credit card bills). Missing these payments can lower your credit score, since payment history is one of the largest factors that goes into calculating it. This is why budgeting and being able to pay for your daily expenses before committing a large portion of your income to investments is essential.

Additionally, if you end up relying more on your lines of credit to pay for important items, you could be increasing your credit utilization ratio, which is the percentage of how much of your credit limit you use. Increasing this ratio could hurt your score further.

On the other hand, if your investments generate more revenue, you could begin paying off debts and relying less on your credit cards to make your payments. This could help improve your credit score as you have more money to make your payments on time, pay off your debts and more.

Does buying or selling stocks affect your credit score?

Like other forms of investments, buying or selling stocks won't directly change your credit score, but they can indirectly affect it. However, there is an exception — margin accounts.

What is a margin account?

According to Experian™, a margin account is a type of "brokerage account that gives you a line of credit you can use to buy stock." Instead of using your own funds, you're using a line of credit issued by the brokerage firm to pay for your stocks. In this example, a brokerage firm acts much in the same way a bank or other financial institution would. This is a high-risk form of investment, generally used only by experienced investors.

How it affects your credit score

If you open a margin account, the lender may run a hard inquiry — this will temporarily decrease your credit score.

About $2,000 is the minimum requirement for establishing a margin account -- most brokerage houses require this before opening a margin account. While the advantages of opening a margin account can be appealing — such as the potential to have a higher return — there can be consequences.

Most margin traders leverage their existing stock market account. If you have $50,000 in the stock market and you lose your margin investment and owe $25,000, the broker will demand payment and force you to sell shares that will equal the money owed --- meaning that you often have to sell stock at a loss. This could destroy years of careful stock accumulation. If you're struggling to pay back your debts, this could appear on your credit report as a derogatory remark and hurt your credit score.

What to focus on when building credit

Your mind might be racing about all the ways you can build your credit and how your investments could be indirectly affecting it. Take a moment to pause, and remember that strong credit is built up over time, with healthy, savvy habits. Establishing credit is not necessarily about taking out multiple credit cards or making several kinds of big investments through a brokerage account.

Think about what you want your credit to do — do you want a good score to buy a house, a car? A higher credit score could be the difference when it comes to saving thousands of dollars because you could get a lower interest rate. You might want to set up a score goal using the credit planning tool through Chase Credit Journey®. With this free online tool, you can receive a personalized action plan provided by Experian™ to help improve your credit score by a minimum of five points. Additionally, you can receive your credit score for free anytime, anywhere and enroll in free identity and credit monitoring services.

If you're thinking about adding to your credit portfolio by taking out a new card or loan, make sure you have enough funds to cover costs and monthly payments. This way, you won't hurt your payment history while taking out more lines of credit.

The bottom line

If you're considering investing as a way to build revenue and indirectly improve your credit, remember that you shouldn't risk more than you can afford to lose. Additionally,if you do decide to invest, find a time for getting out that works for you. After all, the goal is to ultimately turn your investment —however big or small — into hard cash that will help you create the life you want.

Everyone's situation is different, and each individual has a tolerance for risk that's unique to them. Your goal as an investor is to determine your comfort level, both in terms of the money underpinning the investment and the amount of time you're willing to let your investment grow before cashing out.

Does Investing Affect Your Credit Score | Chase (2024)

FAQs

Does Investing Affect Your Credit Score | Chase? ›

Generally, investments do not directly affect your credit score. In fact, they may not appear on your credit report.

Does investing affect your credit score? ›

Most investment accounts do not show up on your credit report. So, opening an investment account will generally not affect your credit score. Whether you are buying stocks with a credit card or investing by depositing cash into your account, your balance and investment performance will not impact your credit score.

What affects your credit score the most? ›

1. Most important: Payment history. Your payment history is one of the most important credit scoring factors and can have the biggest impact on your scores. Having a long history of on-time payments is best for your credit scores, while missing a payment could hurt them.

What is the #1 rule to maintain a good credit score? ›

Experts advise keeping your use of credit at no more than 30 percent of your total credit limit. You don't need to revolve on credit cards to get a good score. Paying off the balance each month helps get you the best scores.

Is 700 a good credit score? ›

For a score with a range between 300 and 850, a credit score of 700 or above is generally considered good. A score of 800 or above on the same range is considered to be excellent. Most consumers have credit scores that fall between 600 and 750. In 2023, the average FICO® Score in the U.S. reached 715.

Can stocks mess up your credit? ›

Owning stocks, bonds, or other assets doesn't inherently affect your creditworthiness. And there usually isn't a credit check to open one of these accounts. However, investments can indirectly influence your financial situation.

Does Robinhood affect your credit score? ›

FAQ. Will this affect my credit score? No. This process will not affect your credit score.

What brings your credit score up the fastest? ›

  1. 1. Make On-Time Payments. ...
  2. Pay Down Revolving Account Balances. ...
  3. Don't Close Your Oldest Account. ...
  4. Diversify the Types of Credit You Have. ...
  5. Limit New Credit Applications. ...
  6. Dispute Inaccurate Information on Your Credit Report. ...
  7. Become an Authorized User.
4 days ago

What is #1 factor in improving your credit score? ›

1. Payment History: 35% Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences.

Why is my credit score so low when I have no debt? ›

Various weighted factors mean that even with no credit, your credit score could still be low because the length of your credit history or credit mix, for example, could also be low.

Is a 900 credit score possible? ›

Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.

Is 650 a good credit score? ›

As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.

How to get 800 credit score? ›

Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.

What is a good credit score by age? ›

How Credit Scores Breakdown by Generation
Average FICO 8 Score by Generation
Generation20222023
Generation Z (ages 18-26)679 - Good680 - Good
Millennials (27-42)687 - Good690 - Good
Generation X (43-58)707 - Good709 - Good
2 more rows

Can I buy a house with a 716 credit score? ›

However, with a 716 credit score, you should qualify for rates on-par with national averages. Also, even though your score qualifies you for a mortgage, it's important to know that the lower your score is, the stronger the rest of your qualifications are generally expected to be.

Can I buy a house with a 699 credit score? ›

FHA loans: FHA loans are a popular choice for borrowers with fair credit. Nearly 60% of all FHA loans that closed in June 2020 went to borrowers with credit scores of 600 to 699, per Ellie Mae. With a credit score in this range, you'll only need a down payment of 3.5% to get an FHA loan.

Do stocks show up on credit report? ›

But the credit report leaves out some important data: According to Experian, “information about assets such as checking account balances, savings account balances, certificates of deposit, individual retirement accounts, stocks, bonds or other investments” are not listed in your credit profile.

Do investments have credit risk? ›

However, it's not only people that have credit risk: investments, such as bonds, also bear it. The credit risk tells investors how risky it is to invest in any particular asset.

Why is it risky to buy stocks on credit? ›

Borrowing money you cannot repay

And if you lose money with your investment, you may face more money owed in credit card fees on the balance, due to late or missed payments, and take a credit score hit.

Does taking out finance affect your credit score? ›

A personal loan will cause a slight hit to your credit score in the short term, but making on-time payments will bring it back up and can help improve your credit in the long run. A personal loan calculator can be a big help when it comes to determining the loan repayment term that's right for you.

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