Does crypto affect your credit score?

Considering investing in crypto and worried that it could affect your credit score? In this guide we cover all your burning questions.

Since the start of 2022, the crypto market has been slowly declining and in June Bitcoin was down around 40%. Why? The main cause is due to various crypto lending platforms blowing up after LUNA collapsed (find out more about the current crypto market in our guide).

With all the drama going on in the crypto-sphere, more people than ever are questioning whether your crypto investing can affect your credit score. Crypto cannot directly impact your credit score, but it’s not so black and white – there are some indirect ways that it can.

But if you’re thinking about buying the dip or are just curious about how your credit score is shaping up, Finder has a free tool that checks your credit score without causing it any harm.

Crypto is unregulated in the UK; there's no consumer protection; value can rise or fall; tax on profits may apply.

Does crypto affect my credit score?

Ultimately, crypto does not directly affect your credit score. As your credit report does not contain any specific information about your earnings, savings or investments, owning or buying cryptocurrency does not directly affect your credit score. However, this isn’t to say that your credit score won’t be impacted by your investing habits.

Indirect ways crypto can impact your credit score

There are some indirect ways that crypto can affect your credit score and we’ve listed them below.

Buying crypto with a credit card

This is generally not a good idea. But it’s possible and we have produced a guide about this. As with any form of credit, there are several risks involved that can impact your credit score.

If you do choose to pay for your investments with a credit card, not only could you lose all your money, you could expect additional fees and charges. Even if you manage to find a credit card provider that doesn’t charge a cash advance fee for crypto purchases, there are still other ways that your credit score can be affected.

As we’ve established, the act of buying crypto will not directly impact your credit score, but crypto is notoriously volatile and if you decide to purchase significant amounts of crypto or increase your credit limit to help fund your investing, you could find yourself in a sticky situation if the market crashes. If you do find yourself struggling to pay off bills or credit card balances due to your investing habits, this could be reflected in your credit score.

  • Warning: Late repayments can cause you serious money problems. For help, contact the MoneyHelper.

Cryptocurrency investment scams

Even the most eagle-eyed people can fall for scams, so it is always best practice to buy your crypto from trusted and established providers. However, hiccups happen and unfortunately, if you have found yourself at the short end of a stick you would usually be protected under the Section 75 clause. Currently in the UK, crypto is unregulated and not applicable to the protection, so any debts incurred could have a negative impact on your credit score.

The Financial Conduct Authority (FCA) is currently trying to block any potential scam firms from entering the consumer investment market and is actively encouraging potential investors to be scam-smart.

Crypto lending in the UK

Crypto lending is not readily available in the UK, but it is not off the table and could end up taking flight in the future.

Crypto loans are an alternative form of personal lending that will allow you to use your crypto investments as collateral instead of your home or your car. However, due to the erratic nature of crypto you could find yourself constantly having to deposit or remove funds from your account to keep on top of repayments. Like any form of borrowing, failing to repay your loan on time could have a negative impact on your credit score.

Although this is not currently the case in the UK, for all those crypto enthusiasts, these types of loans could present an interesting opportunity if the FCA decides to regulate the UK crypto market.

Could crypto directly impact your credit score in the future?

Unfortunately, we’re not Mystic Meg and cannot predict if crypto definitely will have an impact on your credit score in the future, but if the FCA decides to regulate this market, you could expect that there could be a correlation between them.

FAQs

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Cryptocurrencies aren't regulated in the UK and there's no protection from the Financial Ombudsman or the Financial Services Compensation Scheme. Your capital is at risk. Capital gains tax on profits may apply.

Cryptocurrencies are speculative and investing in them involves significant risks - they're highly volatile, vulnerable to hacking and sensitive to secondary activity. The value of investments can fall as well as rise and you may get back less than you invested. Past performance is no guarantee of future results. This content shouldn't be interpreted as a recommendation to invest. Before you invest, you should get advice and decide whether the potential return outweighs the risks. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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