Crypto

How To Use Cryptocurrency To Build Your Credit?

Published

4 months ago

March 18, 2024

How To Use Cryptocurrency To Build Your Credit?

The emergence of cryptocurrencies like Bitcoin and Ethereum is transforming finance. As digital currencies gain mainstream traction, many wonder if crypto can improve their credit. This guide explores using cryptocurrency to build credit.

This will explore the evolving intersection between crypto and credit. You’ll learn how transactions may influence your creditworthiness. We’ll also discuss best practices for managing crypto with your profile and obligations.

Understanding Cryptocurrency and Credit

Cryptocurrency allows secure digital transactions without third-party intermediaries. Instead, transactions occur on a decentralized public ledger called the blockchain.

Despite the hype, few merchants accept cryptocurrency payments. However, crypto is going mainstream:

Major companies like Microsoft and AT&T accept crypto payments.
Crypto debit cards like Coinbase Card enable spending digital assets anywhere.
Cryptocurrency exchanges let users trade fiat for crypto.

As cryptocurrency adoption grows, it may start influencing credit scores that determine loan and credit card eligibility.

“Cryptocurrency will have an impact on credit scores in the next 2-3 years as more lenders take crypto investments into consideration.” – Experian Credit Expert.

Let’s examine how cryptocurrency could affect credit.

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How Credit Scores Work

Your credit score represents your creditworthiness or likelihood of repaying debts. Lenders use credit scores to decide:

Loan and credit card approvals
Interest rates and credit limits
Rental applications
Utilities and phone contracts

FICO and VantageScore are the two most used credit scoring models:

FICO scores range from 300 to 850. 720+ is considered excellent credit.
VantageScores also range from 300 to 850. 750+ is an excellent score.

Several factors determine your score:

Payment history (35% of score) – Records of on-time payments.
Credit utilization (30%) – Percentage of available credit used.
Credit history length (15%) – How long you’ve had credit accounts.
Credit mix (10%) – Types of credit accounts.
New credit applications (10%) – Frequency of new credit requests.

Maintaining a high credit score demonstrates financial trustworthiness. Let’s explore how cryptocurrency transactions could impact scores. A low credit score has a significant impact of bad credit on financial life, making it harder to qualify for loans, credit cards, and other services.

Cryptocurrency Data and Credit Reports

Cryptocurrency isn’t factored into credit scores yet. However, related information might influence your creditworthiness:

Exchange account details: Most exchanges require your SSN, ID, and contact info. Some report data to credit bureaus.

Credit/debit card crypto purchases: Credit card statements show crypto purchases. High balances can lower your score.

Linked bank accounts: Bank account numbers linked to exchanges are visible to credit bureaus.

Lenders are using alternative data for credit decisions. In the future, they may consider:

Crypto wallet balances
Transaction histories
Crypto trading patterns

So how can cryptocurrency transactions improve or damage your credit right now?

Using Crypto to Build Credit

Here are some ways cryptocurrency could influence credit scores in a good way:

Prove financial responsibility: Making on-time crypto payments shows accountability.

Increase credit limits: Lenders may extend more credit if they have asset holdings.

Build credit history: Those new to credit can establish history by managing crypto.

Show financial diversity: Trading crypto displays experience managing diverse financial products.

Raise short-term cash: Crypto assets that gain value can be sold for cash and improve credit utilization.

However, it’s critical to avoid risky practices like:

Missing bill payments because crypto value crashed
Defaulting on loans taken out to fund crypto purchases
Neglecting credit card balances after overspending on crypto

The bottom line? Crypto activity itself doesn’t impact credit yet. But smart practices can demonstrate creditworthiness, while risky behavior damages scores.

Buying Crypto With Credit Cards

Despite the risks, many cryptocurrency investors and newbies gravitate towards using credit cards to make their initial crypto purchases. The main appeal is instant access to cryptocurrency, rather than waiting days for a bank transfer. Many beginners use credit cards to purchase their first cryptocurrency. But, there are some major downsides to watch out for when buying crypto on credit.

High-Interest Rates

Credit cards have high-interest rates, ranging between 14% to 25% APR. If you don’t pay off your balance carrying crypto purchases each month, that debt can snowball out of control as interest compounds.

The volatility of crypto only exacerbates this issue. If the market dips after you buy, you could be stuck with mounting credit card debt and declining crypto value.

Transaction Fees

Most cryptocurrency exchanges charge fees in the range of 3-5% for credit card purchases of crypto. These can eat into your crypto investment compared to using a linked bank account, debit card, or wire transfer. Some exchanges like Coinbase even charge up to 4% additional fees for credit card buys.

Lower Credit Limits

Purchasing crypto on credit cards can prompt lenders to reduce your credit limits or even close accounts. This equates to higher credit utilization ratios that drag down your credit score. Starting with low purchase amounts is wise.

Increased Credit Risk

The volatile nature of cryptocurrencies creates additional risk when using credit to purchase them. If crypto prices tank after you buy, you’re still stuck paying off the credit balance you racked up to fund the purchase. This is money lost that also harms your credit standing.

None of this means credit cards can’t be utilized to invest in crypto. Use caution and restraint to minimize risks. But restraint is vital, and acknowledging the risks allows more informed usage of credit for crypto buys. Weigh the advantages of instant access against interest charges that can accumulate.

Tax Implications of Crypto

In the US, the IRS categorizes cryptocurrency as property instead of currency. This means crypto is subject to capital gains taxation:

Trading one crypto for another is a taxable event. You must report any capital gains or losses to the IRS.
Earning crypto as income or mining it subjects you to income tax.

Failure to report crypto taxes can lower your credit score if it leads to tax liens or levies. Some tips:

Record crypto transactions and basis cost.
Use crypto tax software to simplify reporting.
Consult a tax professional if you have questions.

Conclusion

While cryptocurrency itself isn’t incorporated into credit scores yet, related actions can impact your credit:

Positive: Judicious investing, avoiding risky credit behavior, demonstrating responsibility.

Negative: Missing payments, overspending on crypto with credit cards, ignoring taxes.

Consider these tips to integrate crypto with credit:

Prioritize debt obligations over crypto investments.
Use exchanges that protect privacy and provide records.
Consult a tax pro about crypto reporting requirements.
Limit credit card crypto purchases to avoid high balances.

Over time, cryptocurrency will likely evolve into an asset more recognized by credit scoring models. But for now, educate yourself on the risks and benefits of blending these two financial realms.

FAQs

Should I buy cryptocurrency with my credit card?

Use caution when buying crypto with credit cards due to high-interest rates and fees. Limit purchases to what you can repay.

Do crypto taxes impact my credit?

If not reporting crypto taxes leads to liens, levies, or other red flags that hurt your worthiness.

Can I rebuild my credit using cryptocurrency?

There’s no direct credit score benefit yet, but responsible management signals financial trustworthiness.

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Please note that The Crypto Basic does not endorse or support any content or product on this page. We strongly advise readers to conduct their own research before acting on any information presented here and assume full responsibility for their decisions. This article should not be considered investment advice.

Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.

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Crypto

Why Bitcoin and Trump Are Once Again Crypto’s Biggest Story

Published

7 hours ago

July 26, 2024

Press Room

Why Bitcoin and Trump Are Once Again Crypto’s Biggest Story

It’s day two of Nashville’s Bitcoin Conference, but many attendees are waiting for day three.

The reason? Saturday (July 27), at 2 p.m., is when U.S. Republican presidential nominee Donald Trump will give a keynote address to the conference.

The former president and current hopeful, who once dismissed bitcoin as a “scam” competing against the U.S. dollar, is now positioning himself as a proponent of the crypto industry.

Trump has already raised more than $4 million in crypto for his campaign war chest, and the crypto audience represents an attractive and lucrative voting bloc, particularly given their ongoing disillusionment with the current state of existing domestic digital asset policy.

A free T-shirt being offered to attendees of the conference reads “Vote Trump.”

Per a Barron’s report, the prevailing sentiment among certain bitcoin investors and enthusiasts is that Trump will use his speech to make a major announcement, something along the lines of throwing his support behind having the U.S. government buy bitcoin as a “strategic reserve” asset, akin to foreign currencies, or oil.

Central banks’ investment in bitcoin would lend credibility to cryptocurrency, potentially elevating it to a status similar to gold in terms of being a store of value. Any such move could have a far-ranging influence on discussions around digital currencies and monetary sovereignty.

Trump, who has pitched himself as the “crypto president,” isn’t the only politician speaking at the crypto festival. Republican former candidate Vivek Ramaswamy, independent U.S. presidential candidate Robert F. Kennedy Jr., and lawmakers from both parties — including Sen. Cynthia Lummis of Wyoming — are also slated to speak.

See also: Trump Running Mate J.D. Vance’s Antitrust Views Divide Business Leaders

Crypto Industry Looks to Increase Beltway Influence

Trump’s rebranding as a crypto-friendly candidate is part of a larger trend among Republicans to embrace digital currencies and blockchain technology. This strategy aims not only to attract a young and tech-savvy demographic but also to tap into the substantial financial resources of the crypto sector. By aligning with the interests of cryptocurrency enthusiasts, Trump and his party are seeking to leverage the political and economic potential of this burgeoning industry.

Trump’s running mate, J.D. Vance, has maintained a positive view on the digital asset sector throughout his political career, and voted as a senator accordingly.

The Republican Party’s platform states that the GOP will “end Democrats’ unlawful and unAmerican Crypto crackdown” and “defend the right to mine Bitcoin.”

And as PYMNTS wrote earlier this month, the need for clear regulatory frameworks remains one of the most pressing issues facing the crypto industry.

“What we are seeing, where it’s the UK, Japan, Singapore … even the European Union, more than two dozen countries have come together to provide a framework for crypto regulation,” Ripple’s CEO Brad Garlinghouse said last week (July 17). “It’s frustrating that we as a country can’t get that framework in place. And instead, we have this interminable litigation coming from the SEC that really isn’t solving the problem.”

Ripple earlier this year donated $25 million to the crypto industry super PAC Fairshake, with Garlinghouse saying at the time that those donations would continue each year, as long as the sector had its naysayers.

Read more: Blockchain’s Benefits for Regulated Industries

As the 2024 elections approach, the cryptocurrency sector is poised to play an increasingly significant role in American politics, across both parties.

Per a Politico report on Tuesday (July 23), billionaire investor and bitcoin enthusiast Mark Cuban believes that Democratic Presidential Nominee Kamala Harris would be “far more open” to crypto, though he noted that was “certainly not confirmed by the VP.”

Potentially contributing to the more mainstream embrace of crypto is the fact that institutions are starting to warm up to digital assets, too.

Coinbase Asset Management is reportedly creating a tokenized money market fund, while asset manager BlackRock introduced a tokenization of real-world assets: a fund called BUIDL that holds U.S. Treasurys and gained $500 million of assets following its launch in March.

The tokenization of real-world assets is a function of the blockchain landscape that has captured the imagination of various players across payments, finance and commerce, PYMNTS reported in April.

As PYMNTS Intelligence’s latest report revealed, regulated industries, including healthcare and financial services, must adhere to numerous requirements, such as know your customer (KYC), anti-money laundering (AML) and data privacy regulations. Blockchain could help these industries in that regard.

Crypto

Trump Will Headline Bitcoin 2024 Conference—His Latest ‘Crypto President’ Rebrand Effort

Published

14 hours ago

July 26, 2024

Press Room

Trump Will Headline Bitcoin 2024 Conference—His Latest ‘Crypto President’ Rebrand Effort

Topline

Former president and one-time bitcoin detractor Donald Trump will speak at Bitcoin 2024 in Nashville, Tennessee, this weekend alongside other political figures, looking to further his rebrand as a “crypto president” ahead of Election Day.

Trump will speak at the conference on Saturday. (Photo by Brandon Bell/Getty Images)

Getty Images

Key Facts

Characterized as the world’s largest bitcoin conference, the three-day event hosted at the Music City Center convention complex features a wide range of speakers such as independent presidential candidate Robert F. Kennedy Jr., political commentator and comedian Russell Brand and former Republican presidential candidate Vivek Ramaswamy.

The conference features educational panels, networking opportunities and entertainment experiences such as a Karate Combat/Influencer Fight Club viewing and a screening of a bitcoin movie, “God Bless Bitcoin,” which features interviews with people such as billionaire Dallas Mavericks owner Mark Cuban and skateboarding legend Tony Hawk.

Trump will give a 30-minute keynote address Saturday during the conference’s final day, in a speech that will likely attempt to court voters and capitalize on support he has already received from key cryptocurrency figures like the Winklevoss twins.

Tickets to the conference are pricey, starting at $699 and reaching as high as $21,000 for a single ticket—though prospective attendees can get tickets at a 21% discount if they purchase them with bitcoin.

Get Forbes Breaking News Text Alerts: We’re launching text message alerts so you’ll always know the biggest stories shaping the day’s headlines. Text “Alerts” to (201) 335-0739 or sign up here.

Surprising Fact

Edward Snowden, the whistleblower behind one of the largest classified documents leaks in the history of the National Security Agency, is expected to speak Friday from Russia, and has called the cryptocurrency “the most significant monetary advance since the creation of coinage.”

Tangent

Bitcoin traded down more than 2% at just under $65,000 Thursday afternoon, having mostly plateaued in the last three months, posting gains of a fraction of a percent. It has surged more than 53% since the start of the year.

Big Number

$1.8 million. That is how many dollars worth of bitcoin Trump supporters donated to the Republican nominee through the end of June, according to The Wall Street Journal.

Key Background

The bitcoin conference has historically been used by public figures and companies as an event to announce partnerships and initiatives. In 2021, the president of El Salvador, Nayib Bukele, announced at the event that the country would be making bitcoin a legal tender. Attendance has been inconsistent in recent years, as 25,000 people appeared at the convention in 2022 (when the crypto market experienced one of its worst crashes ever) and 12,000 attended in 2023, according to Bloomberg. Bitcoin 2024 has yet to share attendance numbers, though big-name speakers like Trump could generate more tickets than prior years.

What Has Donald Trump Said About Bitcoin?

Trump has increasingly warmed up to cryptocurrency as Election Day draws closer, ditching the skepticism he had for it years ago. While president in 2019 he said he was not a fan of bitcoin and other cryptocurrencies, calling their values “highly volatile and based on thin air” in a tweet. He also told Fox News in 2021 bitcoin “just seems like a scam,” saying he did not like it “because it’s another currency competing against the dollar.” Since then, Trump has embraced cryptocurrency, allowing supporters to donate to his campaign with bitcoin and selecting a running mate in JD Vance, R-Ohio, who supports and owns at least $100,000 worth of bitcoin. The cryptocurrency market may benefit from Trump winning in November, with bitcoin remaining “sensitive” to the election as its price is “positively correlated with the probability” of a Trump victory, according to Bernstein analysts led by Gautam Chhugani. Trump’s Democratic challenger, Vice President Kamala Harris, is likely to adopt the regulation-centric crypto policies of her former running mate, President Joe Biden.

Marathon Digital Buys $100 Million Worth of Bitcoin

Published

21 hours ago

July 25, 2024

Press Room

Marathon Digital Buys 0 Million Worth of Bitcoin

Key Takeaways

Bitcoin miner Marathon announced the purchase of $100 million worth of bitcoin.
This takes the company’s bitcoin holdings to more than 20,000, worth roughly $1.3 billion.
Marathon said it’s reverting to a strategy of holding all the bitcoin it mines on its balance sheet.

Marathon Digital (MARA) bought more bitcoin.

The bitcoin miner said Thursday that it recently purchased $100 million of the cryptocurrency on the open market, adding that it now owns over 20,000 bitcoin — worth roughly $1.3 billion on the open market — and intends to acquire more.

It also says it now plans to keep all the bitcoin it mines, which it called a “full HODL strategy.”

Marathon CFO Salman Khan explained that a recent dip in bitcoin prices, combined with the company’s strong financial position, provided an ideal opportunity to expand its holdings. The company had lately been selling bitcoin to cover operating expenses.

As of June 30, Marathon held $268 million in cash. The company is set to report its second-quarter earnings on August 1.

Marathon stock was recently up about 1%, with bitcoin down roughly 2% over the past 24 hours to a bit under $65,000, according to CoinDesk.

“We believe bitcoin is the world’s best treasury reserve asset and support the idea of sovereign wealth funds holding it,” said Marathon CEO Fred Thiel. “We encourage governments and corporations to all hold bitcoin as a reserve asset.”