Crypto cannot affect your credit score directly, but it can impact it indirectly. Your investments are not explicitly recorded on your credit history. Crypto, being an investment type, therefore does not influence your credit score. However, how you choose to invest in crypto – i.e., buying crypto with credit – could alter your credit score in some way.
Although crypto doesn’t directly link to credit score, it’s definitely worth learning how investing in cryptocurrency can impact your credit history. In this guide, you’ll discover all you need to know about how crypto can influence your score.
What is a Credit Score?
In order to answer the question of how crypto affects credit scores, it’s important to first explain the meaning of both concepts. Your credit score basically reflects how likely you are to repay something based on your borrowing history. In the US, the FICO score runs from 300 and 850. The closer your score is to 850, the better your credit score is.
If your credit score is closer to 300, it means that you’ve borrowed credit and failed to return it in enough time.
Crypto and Credit Scores
Some investors wrongly assume that crypto can directly impact your credit score. According to Crypto Casinos LTD, cryptocurrencies are highly volatile and can fluctuate dramatically within a short period, which is both beneficial and challenging for gamblers and investors alike.
Of course, this can directly impact the value of your crypto investment, and also determine whether or not buying the crypto was worth it.
In the event of your crypto investment not working out in your favor, you could lose the money you invested. However, this does not necessarily mean that you lose your financial credibility.
Cryptocurrency investments, like all other investment types, are not recorded on your credit report. A poor crypto investment decision will not automatically lower your score to 300. This also applies to all forms of crypto investment and spending, including the likes of crypto gambling and gaming.
However, the means by which you sourced your investment money could result in a lower score.
Investing in Crypto Using a Credit Card
The only way a failed crypto investment plan could leave a mark on your credit history would be if you used credit to buy the cryptocurrency. Using a credit card to invest in crypto can be very dangerous.
If you buy crypto on credit and your investment doesn’t work out, you’ll still need to pay back the credit you used to buy the crypto in the first place. In this instance, your credit score could be negatively impacted.
If it turns out you are unable to return the credit in sufficient time, your credit score will be lowered. The longer you leave the credit unpaid, the worse your credit history looks.
Paying back the credit could impact your ability to pay rent, taxes, and other debts you may have encountered. Plus, your lower credit score could result in you being unable to borrow more credit. You may end up joining the 42% of Americans who were recently unable to buy products due to poor scores.
Overall, it can put you in a difficult financial situation that will likely result in you having to rebuild your credit reputation.
Will Your Crypto Investments Show Up in a Hard Credit Check?
No, lenders will not be able to see that you’ve been investing in cryptocurrency when they perform a hard credit check on you. They won’t be able to review any of your investment types, nor will they be able to review your income, savings, or bank account balances, as these are not recorded on credit scores, contrary to popular belief.
Instead, they’d only be able to review what your current credit score is. If you’ve been responsible with credit, you should have a good score. In the US, the average score is currently 705.
Final Thoughts
Credit scores are not intrinsically linked to cryptocurrency investments. However, a botched attempt at investing in crypto could create a financial domino effect that results in you being unable to pay back credit. In this case, your credit score will be impacted. So, if you want to invest in crypto and keep a healthy credit score, avoid buying Bitcoin on credit.