Credit and Unemployment

Credit and unemployment

Monitoring your credit can help you navigate employment status changes.

Does being unemployed hurt your credit?

Neither employment status nor filing for unemployment will appear on your credit report. However, it’s important to manage the aspects of your credit report that might impact your score—like late payments or overspending—as you navigate unemployment.

HOW CAN UNEMPLOYMENT AFFECT YOUR CREDIT SCORE?

Credit usage

CreditWise may help you track your credit usage and understand how it impacts your score.

Balances due

Monitoring tools may help you manage and gain insights into your open accounts and balances.

Errors & fraud

Credit monitoring may help you detect fraud or errors, potentially avoiding increased costs.

CREDIT IMPACT

Does my income affect my credit score?

Like your employment status, income does not directly affect your credit score. However, sudden loss or reduction of income may cause you to rely more on credit, miss payments or have accounts sent to collections. These actions may harm major credit metrics like payment history, outstanding balances and credit usage.

CreditWise’s Credit Score Simulator, Free Credit Report and personalized tips may help you understand your score, how to improve it and how your choices affect it.

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Maintaining your credit

Keeping strict tabs on your credit profile could be especially important while being unemployed. It often helps you identify fraud and errors, monitor your credit trends and strategize ways to improve your credit. CreditWise can be an essential tool in this process.

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TO MANAGE YOUR CREDIT:

Keep balances low

To manage your debt-to-income ratio, keep account balances low by paying statements in full.

Simulate impacts

Use the Credit Score Simulator to see which financial decisions may most benefit your credit.

Report Inaccuracies

Credit inaccuracies may cause unexpected costs. Report them right away to reduce that risk.

FREQUENTLY ASKED QUESTIONS

Can being unemployed hurt my credit?

Generally, being unemployed shouldn’t hurt your credit, and unemployment benefits don’t typically appear on your credit report.

While being out of work shouldn’t impact your credit directly, it may contribute to challenging financial situations that do. When money is tight, people may be more likely to make late payments, have accounts sent to collections, use more of their available credit and open new credit lines or accounts to make ends meet. All of these may negatively affect your credit score.

Does filing for unemployment affect my credit?

Filing for unemployment does not involve a credit inquiry and, therefore, shouldn’t impact your credit score.

Can I apply for new credit cards while unemployed?

Typically, you can apply for new credit cards while unemployed. However, doing so may have a two-fold effect on your credit profile.

First, when you apply for a new credit card or account, banks or lenders usually make a hard credit inquiry to assess your financial reliability, which may cause your credit score to temporarily drop by a few points. If multiple requests for the same product—like credit cards—appear in a short timeframe, the first inquiry may be the only one that affects your score.

Second, if you’re approved for the credit card, opening the new account may cause another drop in your credit score. Having recently opened new or multiple credit accounts may also cause potential lenders to view you as a risky borrower.

Should I pay off my credit card debt while unemployed?

Reducing your credit card debt should lower your credit usage, which may help improve your credit score. However, ensuring that your other accounts are paid on time as much as possible is also important.

CreditWise’s Credit Score Simulator may help you make important financial decisions like these by simulating the effects various actions might have on your credit score.