Does Robinhood Affect People’s Credit Score?

Robinhood is a California-based financial firm that aims to make stock trading accessible to the general public at no cost. That is, to a considerable extent, what they have done.

Robinhood has made it extremely simple and accessible for average Americans to get started in stock trading and investing.

Unlike the other services, they don’t demand you keep a minimum dollar amount in the stock investment or have a lengthier holding time before you obtain your money in your bank account.

There are numerous trading platforms available today. Still, if you’ve opted to invest in Robinhood, you may be wondering if trading on Robinhood will affect your credit score, which, we believe, is a legitimate concern.

Does Robinhood Affect Your Credit Score

In short answer — no.

Your credit score is not affected by Robinhood. However, like with most financial services, Robinhood can have various effects on your credit score. When you’re starting a new account, for example, various factors can affect your credit score in the future, such as whether you created it straight away or asked for a loan 3 months later.

A corporation frequently requires personal information to register an account in your name. Your social security number, driver’s license or state-issued Identity card, date of birth, and postal address are all included.

A credit reporting agency, such as Experian or TransUnion, will add the account to your credit report once you’ve successfully opened it. Robinhood will not affect your credit score if you have decent credit.

However, if you have bad credit or none, it might hurt your credit score.

Your credit report is marked as a ” hard inquiry ” whenever you apply for a financial product, such as a variable-debt account; your credit report is marked as a “hard inquiry.” This is 10 times worse than a “soft inquiry” when your score is checked.

The credit bureaus will notice these queries each time you visit your report and show items in the latest to the least recent sequence.

This might negatively influence your credit score for up to 2 years after it is established. However, regardless of how appealing the cheap charge trading is, you should not apply for Robinhood if you have poor credit.

Although there are advantages to opening a new account with bad credit or starting to save money in general at a young age, if you already have a negative history influencing what was once a strong score, it will most certainly influence your score negatively.

Opening new accounts might be avoided or postponed until your credit score has risen appropriately. Instead of investing in stocks, put the money you planned to spend with them into a high-yield savings account. You can start utilizing services like Robinhood once your credit has improved.

If you have strong credit and are currently using the app, there is no need to worry about it negatively impacting your score.

Furthermore, if you have bad credit or none but are still eager to open an account with them, you should know that not all credit agencies are the same.

While one may display your inquiries in chronological order from most recent to least recent, another may do so in the opposite, beginning with the earliest first. If this is your situation, it may help you raise your score if you intend to apply for other services.

Does Robinhood Run a Credit Check?

Unlike other financial firms, they do not conduct a regular credit check. This procedure necessitates reviewing all 3 of your credit reports from the three major credit agencies, something Robinhood does not have to do.

You only need to provide your social security number & mailing address to start a new account with them.

Start adding various forms of assets in the future, such as options or margin trading. They may do a credit check on you after evaluating how well you generally manage the stock market. However, it’s also possible that they won’t. In general, they looks for two things in new consumers before allowing them to utilize its services: age and banking history.

In summary, individuals under twenty-one are unlikely to be needed to show standard proof of identity, like their driver’s license or passport. As a result, if you’re under 21 and have a solid bank account, it’s feasible that they may just assume your credit score is good or non-existent. Instead, they will continue to use your financial history as proof of identification if this occurs.

Does Robinhood Influence Your Taxes?

No, they don’t have a bearing on your taxes, but it also doesn’t assist you in filing them. Only the investments that you sell are taxed. Even though they don’t charge any fees throughout the trading process, you must still pay capital gains tax on each trade.

It is essential to remember that no real money transactions are involved because this is a digital business. Unless you have an account with a brokerage business that offers actual certificates, all transactions will be taxed as capital gains.

Do You Need a Good Credit Score For Robinhood?

According to studies, 43% of Robinhood consumers have a credit rating of less than 650. On the other hand, Robinhood does not need its consumers to have a high credit score. They won’t even look at it most of the time.

This may be different when you join other online stock trading organizations with investing platforms that demand credit checks, such as your credit history and credit score. But, this is only possible if you trade on margin.

If a Robinhood Gold client requests to trade on margin, Robinhood may obtain a credit report.

Final Word

Establish a Robinhood account without disclosing anything besides your social security number or mailing address. While this is a fantastic service, it might become risky if you make greater investments without first validating your identity.

Suppose you are under 21 and don’t have a credit history or evidence of income. In that case, they may just presume that your identification is fine and that you’ll continue to trade without being prompted by a credit check.

While this may appear to be a good thing for customers, it must be taken seriously by businesses.

Finally, if you want to start a Robinhood investing account, you shouldn’t worry about your credit score because they won’t verify it unless you signup for margin trading.