Does investing affect your credit score?
Thinking of investing for the first time? Whether you’ve been reading online guides or you’re looking for advice, there are plenty of misconceptions on the subject of with stocks and shares.
As with any financial decision, you should think carefully before investing. If you’ve got bad credit, you might not be able to secure the funds you need to make a strong start. Likewise, if your credit score is something that you’ve been working on for a long time and you’d like to protect it, you should tread carefully with future investments.
One of the questions that circulates most often, especially amongst beginners, is whether or not investing in stocks affects your credit score. It’s always worth learning the facts before jumping to conclusions.
How to buy stocks
The process of buying stocks can be undertaken in several ways.
To get started, you’ll usually need to seek the assistance of a stockbroker first. As a beginner investor, you can’t just approach the stock exchange and ask to buy stocks straight away.
Whether you use an online trading platform or an independent professional, a stockbroker will direct you to the most suitable investment. If you’re not confident about your credit score, it’s important to be honest.
Buying stocks and credit scores: The lowdown
Buying stocks or any other type of investment won’t usually affect your credit score or show up on your credit report.
However, if you apply for a margin account, you might see some changes to your report. This is a specific type of investment account that offers a line of credit to users. If you’re thinking of investing, risk should always be considered first. Never attempt to invest on borrowed money if you don’t know the process inside and out.
Does investing affect my credit score?
If there’s no record of borrowing money, the act of investing will neither help nor hamper your credit score. Margin accounts are the only exception to this rule. Remember that using credit for investments increases the risk significantly.
What else could impact my credit score?
If you’re interested in keeping good ground before your next big financial decision, you can find innovative ways to protect and build your credit score. A few of the most influential financial factors that could affect your credit score include:
- Your borrowing history
A credit score reflects how well you handle your debt. If you have a history of almost exceeding your credit limits or reaching the upper end of your overdraft, this could affect your score.
- Your repayment history
If you have a direct debit or standing order, missing a payment will reflect negatively on your credit score. It can take years to recover your score after this type of setback.
- Moving house
Good credit scores are awarded to those who can demonstrate stability. If you’ve moved house every year, you may struggle to maintain your credit score.
Overview
Remember, investing should be something you start for long-term gain.
If you’re looking for short-term solutions or speedy access to funds to help cover expenses, investing won’t be the best strategy. Above all, if you’re struggling to cope with your personal finances, it’s imperative to seek advice on debt and money before you make any important decisions.
