interactive brokers credit check

Interactive Brokers, commonly known as IBKR, is the largest electronic brokerage firm regulated by the Securities and Exchange Commission.

Through this firm, one can trade almost every type of asset, including stocks, fiat and cryptocurrencies, exchange-traded funds, and metals.

While asset trading is possible with Interactive Brokers, you might wonder if they do a credit check.

Interactive Brokers credit check: Interactive Brokers does not carry out a credit check for new accounts. Rather, IBKR will review your application to evaluate your annual income and trading experience in the commodity for which you’re asking trading rights. Although the process is entirely automated, it is subject to manual inspection if anything suspicious arises.

In this article, we’ll look at Interactive Brokers as a brokerage firm. I will also discuss the requirements for trading on IBKR and the stage where a credit check is required. 

What Does Interactive Brokers Do?

interactive brokers credit check
interactive brokers credit check

Interactive Brokers serves as a “middleman” between an investor and a securities exchange like any other typical broker.

But, of course, being an intermediary is not enough to earn Interactive Brokers a favorable reputation or the first rank as an electronic brokerage firm. IBKR provides much more financial services to its customers.

Let’s look further into the services offered by Interactive Brokers.

  • With Interactive Brokers, customers can open an Integrated Investment Management Account. This single account enables users to trade stocks, futures, options, and ETFs anywhere in the world.
  • Financial advisors can use Interactive Brokers to set up multiple accounts to manage money for several clients.
  • Interactive Brokers is the first brokerage firm to provide penny-priced options, keeping them ahead of the competition.
  • Interactive Brokers offers an online service known as the Portfolio Analyst that helps users assess their portfolio’s progress and compare it to over 80 major benchmarks.
  • The Fractional Share Trading and Cash Quantity stock orders offered by Interactive Brokers provide customers access to high-priced stocks and help them diversify their portfolios.
  • IBKR recently established the Bonds Marketplace to assist investors in discovering the lowest rates of various fixed-income securities, as well as the Impact Dashboard to help clients interested in “sustainable investing” match their investments with their principles.

Generally, Interactive Brokers is a full-featured trading marketplace aimed at both intermediate and expert traders.

Do You Need a Good Credit Score to Open an Account with Interactive Brokers?

A credit score above 670 is considered satisfactory according to the credit bureaus. Likewise, your financial ground is regarded as impressive if you have a credit score equal to or higher than 671.

For both the FICO® and VantageScore models, the highest credit score attainable is 850.

You do not need a high credit score to open an Interactive Brokers account. The principal information Interactive Brokers will look for when you create a regular brokerage account is proof of a legitimate bank account and Social Security Number.

So, before you open a brokerage account, make sure you have a legitimate bank account. You shouldn’t have any problems opening an account if you provide Interactive Brokers with the correct banking and personal identity details.

If you register for a margin account, it is expected that Interactive Brokers will perform a credit check. However, you will most likely be approved, even if you have a bad credit score.

A credit check is just a general formality; brokerage firms are mostly interested in whether you can repay a margin call if you trade on margin.

Nonetheless, it is advisable that you have a credit score of at least 671 to open a margin account with Interactive Brokers.

What Do You Need for the Application for Interactive Brokers?

To start trading with Interactive Brokers, you need to open an account application. Here are the details required for the application.

  1. Your name, address, and phone number
  2. A US Social Security Number or an ID number (National ID card, Driver’s License, Passport, or Permanent Resident Card) if you are not a US citizen
  3. Your employment status and employment information 
  4. Your account number(s) from a bank or a third-party broker, as well as a routing number for check deposits
  5. Your estimated net worth
  6. Your estimated liquid net worth
  7. Your annual net income
  8. Your total assets

If the account application is for a business entity, additional information is required. You will have to provide:

  • The tax or government-issued identification number for the business entity.
  • The tax classification in the United States (partnership, corporation, disregarded entity).
  • The name, address, phone number, and US Social Security Number or ID number of the administrator.

These details are all that is needed to create your Interactive Brokers account. Any further information required depends on the type of account selected – cash, margin, and portfolio margin accounts.

Details like your credit score and your loan statement are not required. 

Is There a Minimum Deposit to Open an Interactive Brokers Account?

Interactive Brokers does not require a minimum deposit to open a regular account (cash account). However, a deposit of $2,000 is necessary for margin accounts.

When Does Interactive Brokers Do a Credit Check?

Interactive Brokers does not carry out a credit check for your brokerage account. However, it is expected that a brokerage firm does a credit check if you open a margin account in order to trade on margin.

Margin trading involves borrowing funds to purchase and sell stocks or other investments like options, futures, and metals. Better put, you are taking out a loan to invest.

You also give up some ownership and control of your investments to the brokerage company that provides you a margin loan since you’re taking out a loan to acquire the assets.

Therefore, if things don’t work out, the brokerage company might sell all of your shares without consulting you. Hence, the $2,000 deposit required to open a margin account on Interactive Brokers.

It is understandable if you assume Interactive Brokers will do a credit check at this point, considering the risks involved in margin trading. However, aside from the information required for the application mentioned earlier, Interactive Brokers does not particularly carry out further checks.

As long as you have the minimum deposit of $2,000 to suffice for a margin call, Interactive Brokers will not do a credit check at any point.

Bottom Line: interactive brokers credit check

Trading on Interactive Brokers is not a difficult task. IBKR usually will not do a credit check, so you do not have to worry about your credit score. And if they do, you will be approved in most cases, regardless of your credit score.

Yet, trading involves many risks, so you should try to be on the safe side. It is best to earn a credit-worthy rank before opening an account on IBKR, particularly a margin account. This way, you know you are safe whether or not IBKR does a credit check.

My favorite option is M1 Finance.

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