Credit Report Score and Your Employment Status
Credit report and credit score 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.
- Payment history. 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.
- Outstanding debt. 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.
- Existing accounts. Stay current on your existing accounts. Pay the minimum if necessary, but get your payments in on time.
- New accounts. 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 end up okay — without damaging your credit report score.