Over the years, Robinhood has grown to provide much more than just buying and selling stocks or exchange-traded funds in the stock market or trading cryptocurrencies. They now offer retirement accounts, savings accounts, a Robinhood Cash Card, Robinhood Gold, etc. Rightfully so, you might be asking if using Robinhood can affect your credit score?
The simple answer is no! Using Robinhood and its services does not affect your credit score. There is only one exception: Using a margin account and failing to make margin payments.
Over 70% of Robinhood users have a credit score of 650 or lower in 2024 (source: zipdo.co). That number shows that Robinhood appeals to a wide range of users who traditionally have not participated in the market. It is up from 43% in 2021.
And that is a wonderful thing in and of itself! It is a first step to spark an interest in financial literacy for those who need it the most. It is financial literacy and learning how to manage and grow your hard-earned money that can make a real difference.
Can Your Investment In Robinhood Affect Your Credit Score?
Investments are generally not part of your credit report at all. Thus, Robinhood does not transfer any trading or investment activity to the credit bureau when you use the Robinhood app.
Your credit score will thus not be impacted by any trades you do on the Robinhood platform. This also applies to trading with cryptocurrencies in your Robinhood account.
The same is true for any retirement account like IRA.
How To Find Your Next Investment Opportunity?
Since you are an investor and since I have you here, are you interested in learning how to find your next investment opportunity? I got you covered with my detailed guide 20 Questions You Should Ask Before Investing In Stock.
Why Does Robinhood Need My Social Security Number?
If Robinhood does not report to the credit bureaus, you might wonder why you must give away your SSN when creating a new account?
Robinhood needs your SSN for identity verification as well as when reporting to the IRS.
While it is true that your credit score isn’t affected by using Robinhood at all, they are required to report to the IRS for tax purposes. When you trade on Robinhood, you are generating a capital gain or a capital loss. Each year, Robinhood tracks all your activity and provides you with an IRS Form 1099. You then use that when tax season comes around to pay your taxes on your gains or claim your loss. There are many different Form 1099’s:
- Form 1099-DIV – This form contains all your dividend payments.
- Form 1099-INT – If you received interest payments, they are contained in this form.
- Form 1099-R – If you have a retirement account with Robinhood, this form contains the information on that account.
- Form 1099-B – Any sold stocks or other securities are contained in this form, regardless of whether the sale created capital losses or a gain.
Does The Robinhood Cash Card Affect Your Credit Score?
Robinhood offers you a Robinhood Cash Card, essentially a debit card. You can use that debit card to spend your available cash. You don’t necessarily need a Robinhood brokerage account to use this service. But if you do, you qualify for the Robinhood Round-Up program. Your transactions are rounded up to the next dollar, and the difference is transferred to that brokerage account.
The Robinhood Cash Card does not affect your personal credit score in any way. Robinhood does not send your data to the credit bureau.
Does A Margin Account Affect Your Credit?
When you are using a margin account for margin trading, this generally shouldn’t affect your credit score directly. If your margin account balance falls below the value covered by the available cash and the stocks you own, you will need to cover the rest. That can happen for many reasons, including a reversal of a deposit from your bank account. If you fail to make the necessary payments, Robinhood could report the account as a delinquent account. In that case, your credit score can definitely be negatively impacted.
Robinhood will issue what’s called a Margin Call. This call is your opportunity to prevent such a situation, because that call essentially is a warning from Robinhood that it will sell your stocks to cover a negative balance. If that isn’t enough to bring your account to $0, Robinhood can report your account.
I do not recommend beginner investors using margin accounts on Robinhood. It is far less risky to use a cash account instead. And since you are learning, that should be all you need. Margin accounts allow you to trade with money that you don’t have. If you want to learn how you can disable your margin account on Robinhood, it is a good idea to read my article about that topic.
What Does Affect Your Credit Score?
Let’s take a look at what really affects your credit score, such as your FICO Score. The FICO score is where lenders look when they are reviewing mortgage applications.
It helps you to understand how that score is calculated if you want to build a good credit score. For the FICO Score, these are the areas that determine your score:
- 35% Payment history – Have you paid your credit cards and auto loan payments on time? Your monthly payments history shows a lender how much risk he takes lending you money. It is the most important factor for your credit score.
- 30% Amounts owed – How much of your total available credit line are you actively using? This category is why you should not max out your entire credit but instead stick to a 30-50% maximum credit utilization. If you are carrying credit card debt, this is the category that falls into.
- 15% Length of credit history – Having a longer credit history simply provides more data to judge with. This category is the reason why you shouldn’t close out old accounts.
- 10% New credit – Tracks when and how many new accounts you have opened. Opening many accounts in a short period of time can negatively impact your score.
- 10% Credit mix – Do you have a mix of credit cards, installment loans, retail accounts, etc.?
Does Robinhood Pull Your Credit Score?
Robinhood generally isn’t interested in your credit score and will not perform a credit check. The only case when Robinhood might request a credit report is during the application process for a margin account.
Note that this might be different for other brokerage firms or financial institutions. Do your research before you sign up with any brokerage firm.
Final Thoughts – Can Using Robinhood Affect Your Credit Score?
As a Robinhood user, you can rest assured that your credit score is not impacted by the actions you take on the platform. None of the services offered have any impact on your score.
That said, it is important to know and understand how your credit score is calculated. It shows you what the things are that have the most impact on your score. Having a clean payment history and making sure to pay your credit month-to-month is the best way you can build a great credit score over time.
Robinhood will never make a hard inquiry of your credit report for anything on the platform. Hard inquiries can hurt your score, too. So it’s good to know that you are on the safe side.
Disclaimer:Â The information in this blog post should not be considered tax advice or a replacement thereof. They are solely provided for informational purposes and as educational resources. Please consult with a tax professional for any specific questions on your taxes.