How Does Cashing Your IRA Affect Your Credit Score?

Cashing in your IRA has no direct impact on your credit score, because IRAs are not credit accounts, so they are not factored into the credit-scoring model.

The Facts

An Individual Retirement Account (IRA) is a tax-advantaged savings account used to finance retirement. A credit score looks only at how you have managed your debts, not your savings.


Even though cashing out your IRA has no direct effect on your credit score, the way you spend the money you take out can affect it.



Using the money you take out of your IRA to pay down debts, get current on delinquent accounts or eliminate the need for a new loan can improve or avoid damaging your credit score.



While the money in an IRA or a savings account has no impact on your credit score, lenders may consider how much money you have in reserve when you apply for a major loan.



Before cashing out your IRA, find out if there will be tax consequences. The IRS may impose a 10 percent early-withdrawal penalty if you withdraw funds before age 59 1/2.