If you have found yourself recently unemployed you may be wondering will being unemployed affect my credit score? Unfortunately this isn’t a question that can be answered with a straight yes or no answer but the following information will help you in managing your finances during periods of unemployment.
The good news is that being unemployed will not directly impact your credit score. What this means is that your employment status is not reported to any credit reporting agency. Your credit score will not increase or decrease based on your being unemployed.
However, there can be indirect effects on your credit score due to your unemployment. Most of these effects come about due to being unable to keep up on bills and falling behind on payments. For example, if you become unemployed your money available will decrease and thus you might be unable to make minimum monthly payments on your various bills and credit cards. Therefore, if you can’t make payments for more than a month or two this will be reported to credit reporting agencies and may cause your score to decrease.
There are some steps you can take to reduce the impact of being unable to pay your bills when unemployed and thus reduce the damage to your credit score. The first step is to ensure that you are receiving unemployment benefits. You’ll need to visit your local government unemployment office as soon as possible to get benefits coming in soon. The next step is to reduce your spending as much as possible until you get another job. Cut back on all unneeded expenses and focus on your bare basics such as food, shelter, utilities, and making minimum monthly payments on your credit cards and other loan based bills.
In the event that you can not make even the minimum monthly payments on bills such as credit cards you must contact the billing company or card issuer and explain your situation. Even though making the minimum payments on credit card bills will cost you interest and fees it is still better than having your account reported as non-paid which will adversely affect your credit score. If you can’t make the minimum payments contact the issuer as many allow reprieve due to unemployment.
Overall, you simply need to pay at least the minimum monthly amount due on your bills and credit cards or work something out with the card issuer in order to avoid credit score damage.