Does Being Unemployed Hurt Your CIBIL Score?

Financial stability is important in one’s personal life. A financial stable life means having sufficient finances to fulfil basic necessities and daily living expenses for you and your loved ones. However, for a salaried individual, a sudden loss of income due to a temporary job loss can put their entire life on hold and cause a lot of stress. While unemployment may impact your income, it isn’t a major factor on your credit. Taking the right measures at the right time can help maintain your score even if you are out of work. Let’s have a look at how being unemployed could indirectly affect your credit score and ways to protect your credit score if you’ve lost your job.

Impacts of Unemployment

Being unemployed could lower your credit because when you lose your income, it becomes difficult to pay your bills and manage other financial obligations which could result in defaulting on payments. Additionally, a loss of income could drive you to rely on credit cards more than usual, which can ultimately spike your credit utilization ratio. Your credit utilization ratio and payment history are the most important aspects of your credit scores, so any fluctuations in these factors could have an impact on your credit score.

Does Unemployment Get Listed On A Credit Report?

Your credit files do not reflect any periods of unemployment on your credit report. The reason an employer would show up in your report is if you listed your workplace on the previous credit application. When you apply for a loan and submit your application the lender submits records of your loan application to the credit report, the information then gets recorded in your file. Credit reports do not contain any information about your employment status, income, or any other assets. Additionally, your credit reports won’t contain any record of applications for unemployment benefits as it is not considered as a part of the public record. 

Can You Get Credit If You’re Unemployed?

Unemployment is not a major factor in your credit, it can still alter your finances making it difficult for you to avail a new credit. When you apply for a loan the lender will often look into your profile, credit report and consider factors like your income and employment to check with your creditworthiness. An individual with a stable job and income are most prefered by the lenders. On the other hand, unemployed individuals will have a tough time availing a loan. However, if you plan ahead and make sure you’ll be able to cover the EMIs based on other sources of income you may have, you still have a chance of getting a new loan.

Advantages Of A Good CIBIL Score

Quick Loan Approvals:  A good score means you are disciplined with your payments and are being seen as a creditworthy borrower in the eyes of the lender. Overall this makes you a good prospect and ultimately your loan approvals get quicker.

Get a Higher loan amount easily: Having a good score improves your chances of loan approval at a low rate of interest and a higher loan amount.

Low-interest rate credits: A good CIBIL score can earn you lower interest rates, which also helps in reducing the chunk of EMI that you need to pay and lower your financial burden.

More negotiation authority: With a good score you can get a loan easily, you can also negotiate for a lower rate of interest on the overall loan amount. Lenders usually provide special rates and benefits on the loan for such borrowers.

How To Manage Your Credit Score when Unemployed?

The unemployed stage in one’s life can be quite stressful, sufficient financing is required to manage daily expenses like groceries, food, shelter, transportation, etc. However, it is also important to think about your credit, since it could affect your ability to avail loans and other forms of credit in the longer term. To protect your credit while unemployed you need to:

  • CIBIL Score Check

It is advisable to check your CIBIL score regularly, doing this will help you understand your credit activity and how it affects your score. Unless there are some major changes in your credit card spending or repayments, your credit score won’t fluctuate too much.

  • Ensure Timely Payments

Even if you’re unemployed at least try to make minimum payment towards your debts. Doing so will help protect your credit score from any long term damage. If you keep paying the minimum amount your account would be current and your score would not get affected negatively.

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