Credit Accounts and Health Factor
OctoGear's borrowing infrastructure is built on Gearbox V3 credit accounts. Understanding how they work helps you manage your borrowing position safely.
What is a credit account?
A credit account is an isolated smart contract wallet deployed specifically for you. It holds your collateral and your borrowed funds together. Every action — depositing collateral, borrowing USDC, repaying debt — is checked against your account's health factor at the end of each transaction.
- Health factor ≥ 1.0: transaction succeeds
- Health factor < 1.0: transaction reverts — the protocol prevents you from creating an unhealthy state
Each credit account is isolated. A liquidation in your account cannot affect other accounts or drain the lending pool beyond your own position.
Health factor
Your health factor measures the ratio of your weighted collateral value to your total debt:
Health Factor = Weighted Collateral Value (USD) / Total Debt (USD)
Each collateral type has a Liquidation Threshold (LT) — the fraction of its market value that counts toward your weighted collateral. Riskier collateral types have lower LTs and count for less.
| Band | Health Factor | What it means |
|---|---|---|
| Safe | ≥ 1.5 | Healthy margin |
| Watch | 1.2 – 1.5 | Monitor closely |
| Caution | 1.05 – 1.2 | Consider adding collateral or repaying |
| Danger | < 1.05 | Liquidation imminent |
Liquidation triggers automatically at HF < 1.0. A liquidator closes your position, repays the outstanding debt from your collateral, and returns any remaining collateral value to you.
Liquidation Thresholds by collateral type
| Asset | LT |
|---|---|
| USDC.e | 95% |
| Polymarket YES / NO (> 7 days to resolution) | 40% |
| Polymarket YES / NO (3 – 7 days to resolution) | 30% |
| Polymarket YES / NO (1 – 3 days to resolution) | 20% |
| Polymarket YES / NO (< 24 hours to resolution) | 10% |
Prediction market collateral has a time-decaying LT. As a market approaches resolution, the LT decreases — reflecting the increasing probability of a binary outcome. Monitor your health factor closely in the final 72 hours of any whitelisted market.
Activating collateral
After buying a Polymarket outcome token, the position lives in your custody wallet — it is not yet on your credit account. Two steps are required:
- Deposit — transfer the position into your credit account's SmartMaker (done automatically after a Buy, or manually)
- Activate as collateral — tap the amber "Activate as collateral" button in the Collateral card on the Borrow or Home page
Until step 2 is complete, the position does not count toward your weighted collateral or health factor.
Repaying debt
You can repay any amount at any time. Interest accrues every Polygon block (~2 seconds), so the exact outstanding amount changes continuously. To repay the full balance, the app builds in a small tolerance — leave a dust amount if the exact repay fails and use the full-close flow when available.