Does Unemployment Affect Credit Score?

Debt and Collections

does unemployment affect credit score

Does unemployment affect credit score?

Perhaps you’re newly unemployed and are worried your score will be affected. Maybe you’re wondering whether or not filing for unemployment will affect your score. 

This article has all the answers you need, as well as some helpful advice to help you avoid bad credit if you are unemployed!

Does Unemployment Affect Credit Score? Here’s the Answer!

Your credit report does not record whether you are employed or unemployed, nor does it record if you file for unemployment. Rather, it only shows credit and debt-related information. 

So the short answer is no. Unemployment does not have a direct relation to your credit score. However, it’s important to note that some lenders will not provide loans to unemployed individuals, even if you do have a good credit score.

While unemployment itself doesn’t affect your score, the effects of being unemployed could negatively impact your credit score. Here’s how!

How Unemployment Can Affect Your Credit Score

If you are unemployed, it may be difficult for you to pay off your debt, and funds may be limited. Here are some ways not having a steady income can affect your score:

1. Missing a Payment

Missing or even being late on a payment can have a huge impact on your credit score, dropping it by as much as 100 points! In fact, your payment history makes up 35% of your credit score. That means it’s one of the most heavily weighted components to your total score. Missing even one can be catastrophic. 

If you are late by ninety days or more, it’s considered a serious delinquency by the credit bureaus, and your score will drop even more.

Therefore, if you are unemployed, make sure you don’t miss a payment!

2. Using Your Credit Card Too Much

The available credit you have makes up 30% of your credit score. Therefore, as a rule of thumb, you should never use up more than 30% of your credit card limit. Otherwise, you could damage your score. Additionally, if you can’t pay the minimum payment at the end of the month, it could damage your score. 

In the end, never use more than 30% of your credit card limit and use cash when you can. This will help you avoid accidentally going over and harming your score. Additionally, it will help you use your credit card to build good credit.

3. Bounced Checks Could Wind Up in Collections

If a check bounces, it won’t directly affect your score. However, if you can’t cover checks you have written, a check could wind up in collections, which does appear on your credit report. This can also cause problems with your bank account credit. 

Before writing a check, always make sure you have enough funds in your account. In other words, if you need to make a payment on something, ensure you have the funds to pay it.

Find Credit Help

In the end, does unemployment affect credit score? No, but if you don’t make payments, use over 30% of your credit card limit, or acquire a collections account, your score can drop fast.

If you find yourself with bad credit, a qualified credit repair company can help. Go Clean Credit is a leading credit repair specialist in Arizona. In fact, their credit restoration services can help resolve collections, late payments, bankruptcies, student loans, identity theft, and so much more! 

Go Clean Credit’s mission is your success. They know that good people sometimes have bad credit, and their goal is to help individuals like you reach your financial goals. Even though credit repair can seem overwhelming, Go Clean Credit is here to partner with you to make the process easy. 

Contact them today for a free consultation and learn how they can help you get a great credit score!

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