Credit Report Score and
Your Employment Status
Credit report score and credit report offers sometimes seem like they're
easier to get than job interviews, which raises a question that can concern
many people over the course of their careers: Does your employment status have
any effect on your credit score?
The good news: Under the law, credit bureaus are not allowed to take your
employment status into consideration when formulating your credit score.
The not-so-good news: Your credit report does include basic information about
you, including your name, Social Security number, current and former addresses
— and current and past employers. If you're unemployed, that information can
work its way into your credit report, though not your credit report score.
The particularly bad news, if you're unemployed but hoping for a loan or a line
of credit: Lenders and credit issuers can and will consider a variety of
factors beyond your credit report score when they process your loan or credit
application. Among those factors are your employment history and the amount of
debt you can handle with your current income level. So, while your credit
report score won't be affected by your employment status, your ability to
secure a loan or a line of credit very well may be.
From the lender's perspective, taking your employment status into account
before extending you a loan or credit is just good business. Even if you have a
sterling credit score, the absence of a steady income can raise concerns about
your ability to pay off a loan or a credit card bill. Fortunately, there are
steps you can take to keep your credit score at or near its current level while
you look for a job.
Maintaining Your Credit Report Score While Looking for Work
Your credit report score is based, for the most part, on six factors: your
credit history, your payment history, outstanding credit lines, existing
accounts, new accounts, and recent inquiries. While there's little you can do
about your credit history and recent inquiries, the other four factors are
under your control.
This includes recent history — this month — as well as past history. If you
haven't done so already, work out a monthly budget that will allow you to pay
off at least the minimum amount due on all of your bills, including loans and
credit accounts. Doing so may require sacrifice in other parts of your life,
but it will help your credit score in the long run.
Avoid adding to your debt through new accounts or interest on your unpaid
debts. The closer you are to your credit maximum, the bigger a risk you become
in the eyes of lenders.
Stay current on your existing accounts. Pay the minimum if necessary, but get
your payments in on time.
When you're unemployed, new debt is probably the last thing you want to
accumulate. Avoid taking on new lines of credit; shred and/or discard offers
for another credit card.
Being unemployed is rarely an ideal situation, but if you can stay disciplined
and stick to a budget, you may very well come out on the other end without
damaging your credit report score.