Does Unemployment Affect Your Credit Score?

Unemployment doesn't directly affect your credit score. Your credit score is a reflection of your history with credit accounts, not your employment situation, so losing your job doesn't impact your credit record, or factor into the credit-scoring formula. 

However, if your financial behavior changes because of your job loss, that can impact your score. For example, your score may drop if you miss payments, or lean too heavily on your credit card. 

It’s natural to be concerned about immediate, practical matters if you lose your job. From paying your bills to qualifying for unemployment benefits and getting a new job, there's a lot to think about. The good news is that—unless you make some specific financial moves—you can cross your credit score off your worries. Let’s have a look at what those moves are, so you can protect your credit when you’re between jobs.

What Affects Your Credit Score?

The credit bureaus—the organizations that calculate your credit score—don't look at your employment status, earnings, or wealth. Here are the big factors the credit bureaus use to calculate your credit score:

• Your current debts

• Your payment history 

• The amount of your available credit you use

• The age of your accounts

• The type and number of accounts you have

• Whether you’ve applied for new credit recently

• Collections, foreclosures, debt settlement, bankruptcies, or other significant negative events.

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Current Unemployment Figures 

Before we get into the weeds about the impact of unemployment on your credit score, let’s look at unemployment numbers. 

While the percentage of unemployed American workers is up a bit from its recent record low in April 2023, it’s nowhere close to the 14.8% peak of April 2020. You probably remember what spurred that—the COVID-19 pandemic and mass closures of retail stores, restaurants, and other businesses deemed non-essential, and the resulting layoffs.

As of August 2025, the U.S. Bureau of Labor Statistics reported a 4.3% unemployment rate. This number reflects people aged 16 and over who reside in the 50 states or D.C., who do not reside in institutions, and are not serving in the military on active duty. The unemployment rate has hovered between 3.5% and 4.3% since the U.S. moved past COVID-19. 

Now let’s take a closer look at which financial behavior during unemployment could harm your credit score.  

How Being Unemployed Can Affect Your Credit Score

Being unemployed does not, by itself, impact your credit record or score. However, it can affect your credit score if it changes your financial behavior. 

For example, money can be tight after a job loss, so you might lean more heavily on your credit card, or miss bill payments. Both of these behaviors can affect your credit score, because payment history and credit utilization are two key factors in the credit-scoring formula.

Unemployment can also have a long-term effect on your credit score, because it affects your financial stability. For example, you could deplete your emergency fund while unemployed, which makes you more vulnerable to going into debt or missing payments if something unexpected occurs after you've got a new job, but before your emergency fund is restored.

Here are some of the indirect ways unemployment can harm your credit.

Late payments

Payment history is the most important factor in most credit-scoring formulas, including the two most widely used—FICO Score and VantageScore. Unfortunately, living on unemployment income could leave you short on cash, unable to pay all of your bills on time.

If you are 30 days or more late with a payment, the late payment usually shows up on your credit report. A single late payment could potentially drop your score more than 100 points, according to Chase. Creditors also report when you are 60 days late, 90 days late, or when your payments are charged off and creditors have given up on trying to collect.  

The later you are and the more late payments you have, the more your score declines. If you go into default, your debt is charged off, or you face foreclosure or repossession due to nonpayment, this negative information also shows up on your credit record and can dramatically reduce your score.  

Using your credit cards more

Since unemployment means there's less money coming in, you may use your credit card more to cover basic needs. It’s understandable, but high credit card balances can have a negative impact on your credit score. 

That happens because the balance on your credit cards affects your credit utilization ratio. That's your credit card balance compared to your credit limit. It’s calculated for each card and overall. For example, if you have $10,000 in available credit and charge $5,000 across your cards, then your utilization ratio is $5,000/$10,000, or 50%. 

Lenders view high credit utilization as a sign that you may be over-extended. So as your credit card balances go up, your credit score tends to go down. While ideally your ratio should be as low as possible, your score is impacted more severely if you use 30% or more of your available credit.

The higher your ratio, the greater the damage to your score—and maxing out your card or going over your limit can have an especially big effect. 

Opening new credit accounts

You might apply for a new credit card or loan to tide you over while you’re unemployed. It's really tempting to get new credit if you need help covering the bills, especially if you qualify for a low-interest loan or a credit card with a 0% promotional APR. 

Depending on your financial situation, borrowing at a low rate may make sense if you don't have other options, but you expect to get a job soon and pay off what you've charged.

Unfortunately, any time you apply for credit, you get an inquiry on your credit record that stays there for two years. Too many inquiries hurt your credit score—multiple credit applications could send a signal that your finances are unstable.  Opening new credit also reduces your average account age, which damages your score as well. 

When possible, resist the temptation to get new credit, because of the impact on your score and because of the long-term impact of taking on debt. 

How to Make Sure Unemployment Doesn’t Affect Your Credit Score

Want to protect your score? The key is to closely manage your finances as you shift into unemployment mode. Here are some steps to take.

Adjust your budget

If you don’t want unemployment to affect your credit, make all of your credit card payments on time. While ideally you'd pay off your debt in full every month, you can avoid hurting your score by paying on time, and paying at least the minimum. Ideally, pay enough to stay below the recommended 30% utilization ratio.  

Consider using unemployment benefits to help make these payments. It may also be a good time to look for budget cuts so you can free up funds to repay your debt and cover other essentials. Review your spending, starting with critical expenses like keeping a roof over your head and food on the table, then make paying debt your next priority.  

Make sure the numbers add up, that your expenses don’t exceed income after factoring in unemployment benefits or other assistance, and subtracting for debt payments and vital expenses. Adjust your budget to make your money stretch as far as possible by doing the following:

• Cut unnecessary spending. If your income has taken a hit, anything that’s not a necessity is a luxury. Find expenses that you can cancel or delay. Spend a few minutes canceling monthly subscriptions you can live without for now.

• Try to lower your utility bills. If you've used the same cable company or internet service provider for years, you may be able to cut costs by switching companies or plans. Contact your service providers and ask for cheaper options.  

• Consider debt consolidation. Debt consolidation means using a new loan to pay down your existing balances. Consolidating could make sense if you qualify for a lower interest rate than the rates on your current debts. 

• Lower meal costs. Use supermarket sales, coupons, and bulk purchases to cut the costs of meals at home. If you struggle with cooking, hit those early-bird specials and kids-eat-free days. Order bigger meals and divide them up before you eat, taking the leftovers home for another meal. 

There are also debt relief options to consider when your debt becomes unmanageable. For example, debt settlement is a possibility if you owe a lot of money, are late on payments, and have no prospects of paying back all you owe. 

Debt settlement does hurt your credit score, but can still be a good option if you feel paying back your debt in full is impossible, and you want to resolve your debt for less than you owe.

Look for extra sources of income

There are only so many ways you can save money. If you're worried about paying bills while you aren't working, think about ways to bring in some extra cash.

• Apply for unemployment benefits. Find out whether you qualify for unemployment benefits, and how the process works in your state. It may take a few weeks (or more) before any money arrives, so the sooner you apply, the better. This money can be used to cover your costs and repay your credit cards and other debt.

• Get a temporary job or side hustle. You may not land your next full-time job immediately. While you wait for the right position, try to earn a few extra bucks with a temporary side job. Maybe you can drive for a delivery service or a ride-sharing app. Or if you have an idea brewing for something to sell on Etsy or DeviantArt, it might be the time to try.

• Sell things. If you have anything of value to sell, go for it. There are several online marketplaces where you may find eager buyers for items you no longer need. And if you recently bought some non-essentials, consider returning them. 

As you make this money, prioritize covering key expenses, then making minimum payments, then saving to shore up your emergency fund during this difficult time.

Communicate with creditors

If you can’t make minimum payments, call lenders or creditors before your payment is late. Talking to the people you owe is the best way to avoid dragging down your credit score with late payments.

Explain your situation, and ask if they have any hardship programs or other forms of support. These might include forgiveness for late payments, forbearance that can temporarily halt your payments, or a payment plan that’s more affordable. 

Deal with your debt

Around two-thirds of Americans live paycheck-to-paycheck, and would struggle to stay afloat if they lost their jobs. That's particularly the case for people who already find it hard to stay on top of their debts. 

If you have less money coming in and want to protect your credit, consider getting help from a nonprofit credit counselor. This expert can help guide you through your current options, and offer advice in case your financial situation gets worse. 

Sometimes, the loss of the primary breadwinner’s income is an extreme financial emergency. In that case, you might want to talk to a reputable debt relief company that knows how to negotiate with creditors and deal with debt. A professional debt settlement company could help you to resolve your debt problems for less than you owe so you can rebuild. 

People just like you are seeking debt relief in Virginia and across the country. The first step is the most important one—explore your options.

Unemployment, Credit Scores, and Credit Reports

We've talked a lot about the factors that impact credit scores. To fully understand the connections between unemployment and credit, it's worth going a little deeper into credit scores and credit reports, too. Your credit score is a number between 300 and 850 that gives lenders an idea of how likely you are to repay your loans. There are different kinds of credit scores (like FICO and VantageScore), all based on the information in your credit reports. Read more on how your credit score is calculated.

Unemployment Isn't a Factor in Your Credit Score

Your credit report is a document that contains your personal information, as well as details of your history with credit accounts and recent applications for credit. Your credit history also shows negative information like collection accounts, bankruptcies, and mortgage foreclosures. 

The three main agencies that track and report credit information are Experian, TransUnion, and Equifax. The agencies collect the details provided to them by lenders as well as from public records that show things like foreclosures or repossessions. 

Your employment status is not public record, and credit bureaus shouldn’t be aware that you are unemployed. Credit reporting agencies also do not monitor whether someone has applied for unemployment benefits, so this doesn’t show up on your credit report, either. In fact, someone who checks your credit record would see nothing about your job status at all. 

You can get a free copy of your credit reports from each of the three credit reporting agencies by visiting AnnualCreditReport.com. Your credit report isn't public, but certain people or organizations can access it if they have a legal reason to do so. Checking your record won't hurt your score.

When you check your credit report, you may notice that your job status is not noted. Your credit report could list some previous employers, but it's unlikely to show your entire work history. That's because some creditors may pass info you gave them about where you work on to the credit bureaus. Even if they have, employment details are solely informational, and have no bearing on your creditworthiness. 

How Credit Scores Can Impact Your Job Hunt

Potential employers won’t see your credit score, but your credit history could come into play when you apply for a job. It's not uncommon for potential employers to do background checks on employees. In some cases, that includes a credit report check. This happens more with:

• Financial positions, such as working as a mortgage loan officer or a bank teller 

• Jobs that require access to personal data 

• Jobs in the security field, such as a security guard or night watchman

• Jobs that require a security clearance.

Importantly, even in fields that require background and credit checks, employers can't access your report without your consent, so you'll get a heads-up. 

As you dust off your resume and update your LinkedIn profile, it's worth getting a copy of your credit reports to understand what employers are seeing, and to make sure there are no errors. That way, you won't get caught off-guard by any information your potential employer finds. You can also spot red flags and be prepared to address them.

Employer credit checks are soft inquiries, so they won't hurt your credit score the way a credit card application might. Plus, some states have specific rules about what information employers can access.

Don't Ignore Your Bills If You're Unemployed

If you don't want job loss to impact your credit score, be proactive about managing your finances. During this time of transition, do the best you can with the things that are within your control. 

For example, prioritize essential bills, and avoid using your credit card for everyday spending. Since missed payments and high credit card balances can lower your credit score, being smart about using your cards can help you minimize the impact of job loss on your credit score. 

Exploring credit card debt relief programs is also an option, because while it will hurt your score, debt relief programs can also mean rebuilding, and not getting stuck in debt for years just because you were unemployed.