Trader logo

10 Ways Your Credit Score Can Affect Your Investments

It's true. Your credit score can affect your investments, or even bar you from getting anything done at all.

By Rowan MarleyPublished 5 years ago 6 min read

When you first start investing in the stock market, you probably will have a lot of things on your mind. You will want to know stock market trading terms. You might also realize that you're going to need more money in order to invest in the stocks you want, or that you might have more investing power than you thought.

Chances are, though, that you're probably not going to be thinking about your credit score. Your credit score is typically what you think about when you're dealing with load applications and other similar goods. Though it's usually a loan-related term, you really should consider improving it while you're investing.

If you look at the facts, there are a lot of ways your credit score can affect your investments. Take a look at these ways that having bad credit or no credit could make investing harder...

A poor credit score can make it harder to take out a loan for an investment.

A lot of the traders who made the best stock market trades in history took out loans to bet against the companies they knew would fail. If you want to take a cue from Soros or any other major investor, then being able to take out loans to make those major trades is a must.

The only thing is? If you have a low credit score, you won't be able to get a loan on a favorable term. Though this is a rare route of investing, it still remains one of the ways your credit score can affect investments you make.

If you want to try this route, we strongly suggest you get one of those apps that monitor your credit score.

Some investing groups also will select members based on credit score.

Investing clubs are great for networking and for being able to find new investment opportunities. In many cases, you may be able to find a mentor through them, too.

If you want to get into an investment club and possibly become involved in some private investments, your credit score can affect investments you're allowed to partake in. They may run a background check on you and find that your credit score just isn't up to snuff.

You might have already been debating whether it's better to pay off debt or invest as part of your journey to financial freedom. This is a great debate to have, especially when you take into account the losses you have to deal with when you're making minimum payments on the loans you have.

If you have a lot of debt, you already should be dealing with that before you focus fully on investing. However, even small amounts of debt that are at a high interest rate can make a huge difference in how well you're handling your finances.

One of the ways a low credit score can affect your investments is by impacting your ability to actually enjoy the rewards of a great choice. High-interest loans, such as the ones that you get from having bad credit, can easily eat away at any returns you get.

After all, what good are investment returns if you end up having to declare bankruptcy due to runaway debt?

If you have a very low credit score, you might not even be able to qualify for a bank account.

Here's a scary thought: it's actually possible to be rejected for a bank account! People who have extremely low credit can find themselves being turned away for a bank account.

Many investments require a bank account in order to actually happen, and if you need a special bank account with a bank in order to invest with them, it's pretty easy to see how your credit score can impact your ability to open an account.

If you are looking to invest in a turnkey business, you're really going to have a hard time getting a business loan.

Most people who invest in turnkey businesses do so with a business loan rather than cash they just have laying around. Even those who don't eventually need to get a loan to cover business costs, since even turnkey operations can have unexpected costs.

If you need business funding to keep your investment afloat, it's easy to see how your credit score can affect your investments. An affordable loan can make a huge difference.

Certain financial certifications will also involve credit score checks.

A lot of people who have found their success in investing tend to see their futures in the career of being a financial advisor and set out to start their schooling for it. It's a great career to have, but there's a major catch.

Schooling alone won't be enough to start out as an advisor. You will also need a good credit score. After all, if you can't even sort out your own credit problems, how can you help someone else?

If there is one place where your credit score can affect your investments, it's the world of real estate. Realtors, hard money lenders, and banks all take a look at the kind of cash flow you have.

Along with intense scrutiny over your cash flow, lenders will also take a look at your credit score. Lenders will want to see that you will pay them back once they spot you the money you need in order to make an investment.

The fact is that most banks will not want to give out home loans on bad credit, especially when it comes to investment properties. You may end up paying more in terms of mortgage insurance, down payments, or more.

Simply put, this prices out most would-be investors from actually making money this way.

Certain stock trading apps won't allow you to invest with them if your FICO score is too low.

Believe it or not, even trading in the stock market can be harder when you have a low credit score. Certain apps, like Robinhood, pull credit scores of new users to determine whether they would actually be worth keeping as clients.

If you've been rejected for a stock investing app, this might be the reason why.

If you're looking to start your own company as an investment, there's a good chance that any investors will also get scared away.

A lot of people who start up businesses do so because they view a company as an investment in their future—and at times, they want others to invest in their dreams, too.

Unfortunately for those with a subpar credit score, private investors and companies that may want to work with you have the right to ask about your credit score.

This can lead to issues dealing with being unable to get investors interested in what you have to offer at a point where starting your own company isn't easy enough.

Overall, your credit score can affect your investments if it's really bad.

Generally speaking, you shouldn't have too much of a problem getting into stock market investing if you have decent credit. Getting loans for a business or a simple real estate investment will, however, be difficult without a 700 score.

That being said, most would-be investors will have serious issues when they have a credit score as low as 500.

What we're saying is that your credit history matters. If you're worried about your credit score's impact, it may be time to improve your credit score.


About the Creator

Rowan Marley

Rowan Marley is a 20-year-old sports enthusiast who hails from Brooklyn. When he's not hitting up a local Zumba class, he's drinking organic smoothies. That's just how he rolls.

Reader insights

Be the first to share your insights about this piece.

How does it work?

Add your insights


There are no comments for this story

Be the first to respond and start the conversation.

Sign in to comment

    Find us on social media

    Miscellaneous links

    • Explore
    • Contact
    • Privacy Policy
    • Terms of Use
    • Support

    © 2023 Creatd, Inc. All Rights Reserved.