Unemployment won't directly affect your credit score. Your credit score is a reflection of your history with credit accounts, not your situation. But if your financial behavior changes because of job loss, that's a different story. 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 you can cross your credit score off your worries.
In this article, Freedom Debt Relief explains how to protect your credit when you’re between jobs.
Key takeaways:
The credit bureaus—organizations that calculate your credit score—don't look at your employment status, earnings, or wealth.
Here are some of the factors the credit bureaus use to calculate your credit score:
Before we get too deep into the weeds on the impact of unemployment on your credit score, let’s take a look at unemployment numbers. As of this writing, the U.S. Bureau of Labor Statistics has released unemployment numbers for April 2025.
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 nonessential and layoffs resulting from it.
As of April 2025, the U.S. stands at 4.2% unemployment. This number reflects people aged 16 and over who reside in one of 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 4.2% since the U.S. moved past COVID-19 as an economic detriment.
Now that you know where unemployment stands on a national level, let’s take a closer look at how your financial behavior during unemployment could harm your credit score.
Being unemployed could 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 can affect your credit score.
Here are some of the indirect ways that unemployment can harm your credit.
Late payments
Payment history has a big influence on your credit score. Living on unemployment income could leave you short on cash and unable to pay all of your bills on time. If you're 30 days or more late with a payment, it can hurt your score. The later your payments are, the more they hurt.
Using your credit cards more
Unemployment usually means there's less money coming in. In that scenario, you may use your credit card more to cover basic needs. It’s understandable, but high credit card balances can impact your credit score. That's 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.
Lenders view high credit utilization as a sign you may be overextended. So as your credit card balances go up, your credit score will tend to go down.
Inquiries
You may decide to apply for a new credit card or loan to tide you over financially while you’re unemployed. Depending on your financial situation, that may make sense. But any time you apply for credit, your score could temporarily go down. Multiple credit applications could send a signal that your finances are unstable.
Knowing the indirect ways that unemployment can impact your credit could help you protect your score. The key is to closely manage your finances as you shift into unemployment mode.
Here are some steps you can take.
Now may be a good time to sit down and review your spending. Take a look at where your money goes, starting with the essentials like keeping a roof over your head and food on the table. Factor in income sources such as unemployment benefits or other assistance.
If you don't want your unemployment to impact your credit score, it’s essential you stay on top of bill payments. To do this, rejig your budget to make your money stretch as far as possible.
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.
If you're not able to make minimum payments, call lenders or creditors before your payment is late. The other way to avoid late payments dragging down your credit score is to talk to the people you owe.
Explain your situation, and ask if they have any kind of hardship programs or other forms of support. These might include late payment forgiveness, forbearance plans that can temporarily halt your payments, or a payment plan that’s more affordable.
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 are already finding 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 options now, and in case your financial situation gets worse.
Sometimes, the loss of the primary breadwinner’s income is an extreme financial emergency that's difficult to overcome. 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.
We've talked a lot about the factors that impact credit scores in this article. 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), and they are all based on the information in your credit reports. Read more on how your credit score is calculated.
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 agencies that track and report credit information are Experian, TransUnion, and Equifax. You can get a free copy of your credit reports from each of them every week 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.
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 the info you give them about where you work on to the credit bureaus. Even if they do, employment details are solely informational, and have no bearing on your creditworthiness.
Unemployment doesn't show up on your credit report.
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, or jobs that require access to people's personal data. Importantly, employers can't access your report without your consent.
Potential employer credit checks are soft inquiries, which means they won't ding your credit score the way a new credit card application might. Plus, some states have specific rules about what information employers can access.
As you dust off your résumé and update your LinkedIn profile, it's also worth getting a copy of your credit reports to make sure there are no errors. That way, you won't get caught off guard by any information your potential employer finds about you.
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.
Since missed payments and high credit card balances can lower your credit score, prioritize essential bills and avoid using your credit card for everyday spending to help minimize the impact of job loss on your credit score.
Can a loan company tell if you lost your job?
Your credit report doesn't say whether you are currently employed, so a loan company won't know if you’ve lost your job. However, when you apply for a loan, the lender will almost certainly ask about your income and employment, and may ask for copies of recent pay stubs.
Does your employment history show on your credit report?
Your credit report may show some information about your employment history. This is because lenders may share the information you give them with the credit bureaus. However, your credit report doesn’t contain a comprehensive employment history. Also, unemployment benefits aren’t listed on your credit report.
How might unemployment affect my credit score?
Unemployment won't directly affect your credit score. This is because your score reflects your history with credit accounts rather than how much you earn or where you work.
If unemployment leads to high credit card debt or missed payments, those could affect your credit score.
This story was produced by Freedom Debt Relief and reviewed and distributed by Stacker.
