Dark radiation (DR) appears as a new physics candidate in various scenarios beyond the Standard Model. While it is often assumed that perturbations in DR are adiabatic, they can easily have an isocurvature component if more than one field was present during inflation, and whose decay products did not all thermalize with each other. By implementing the appropriate isocurvature initial conditions (IC), we derive the constraints on both uncorrelated and correlated DR density isocurvature perturbations from the full Planck 2018 data alone, and also in combination with other cosmological data sets. Our study on free-streaming DR (FDR) updates and generalizes the existing bound on neutrino density isocurvature perturbations by including a varying number of relativistic degrees of freedom, and for coupled DR (CDR) isocurvature, we derive the first bound. We also show that for CDR qualitatively new physical effects arise compared to FDR. One such effect is that for isocurvature IC, FDR gives rise to larger CMB anisotropies compared to CDR -- contrary to the adiabatic case. More generally, we find that a blue-tilt of DR isocurvature spectrum is preferred. This gives rise to a larger value of the Hubble constant $H_0$ compared to the standard $Lambda$CDM+$Delta N_{rm eff}$ cosmology with adiabatic spectra and relaxes the $H_0$ tension.
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