Unemployment counts as a traumatic life event, especially during this time of pandemic. It is infinitely stressful if you are the head of a family or sole income provider. This job loss will naturally impact much of your life, but fortunately, it does not directly affect your credit score.
Factors that move your credit score up or down
Several key factors affect your credit score, including amount of debt, payment history, age of credit history, types of credit accounts, and credit report inquiries. Unemployment or employment is out of it.
How job loss indirectly impacts your credit score
Of course, job loss makes waves and it can indirectly impact your credit score, mainly due to how you handle your credit and bill payments from here. Some things that can lower your credit score during unemployment are:
Falling behind on payments. As your income stops coming in, it may be impossible to stay current on your payments. Take note that payments over 30 days late still get reported to the credit bureaus and will reflect on your credit score. The more you fall behind, the larger the impact on your score.
Larger debt and new loans. Without enough savings or unemployment benefits, you will probably turn to credit cards or take out new loans to keep your household running. A larger balance can hurt your credit score.
Opening new accounts. New accounts lower your credit age. This also starts additional credit report inquiries – a double whammy of factors that lower your credit score.
How to keep your score up while job searching
Despite losing your job, you must prioritize keeping your credit score intact. It is a big task but try your best. Some companies even do credit checks in the hiring process. It is not unheard of that qualified candidates get turned down because of information on their credit report.
Your main job now is to continue job searching. The longer you are unemployed, the larger the strain on your finances. Balance your credit standing so it does not stand in the way of your next job offer.