It is true that your credit score is not tied to your employment status, so losing your job cannot immediately affect your score. However, when you take into account the loss of income and how that may impact your household and credit card bills, then you can begin to see how unemployment can really affect your credit score. By making late payments or missing payments, you could drastically lower your credit score. In fact, one late payment can lower your credit score by up to one hundred points, so it is vital that you find a way to remain on top of your bills.
There is some good new for you, though. Roughly half of your credit score is reliant on things that you can control while you are unemployed. Thirty-five percent of your credit score is calculated by your bill payment history. If you can organize a way to keep all of your bills up to date, then you are not likely to experience much of a drop in your credit score. Just keep in mind, though, that because bill payment determines such a large percentage of your credit score, one missed payment can be devastating to the overall score.
You can also find creative ways to apply for new credit while you are unemployed. It is not easy, and you must resist the urge to pile on several new credit cards, but one new one can be handy in helping you out of jams, and the credit approval will boost your credit score. Be diligent in your research before sending in any applications, however. There are credit card companies that prey on people in financial straits, and dealing with these companies will only add more stress to the situation.
You may not have any idea that unemployment is in your near future, which can make planning for such an eventuality pretty hard. There are several things that you can do, however, that might help you fortify your credit in case of hard times. The most effective safeguard is to build a cash reserve for emergency situations. If you are already living paycheck to paycheck, take a look at your budget to see what you can live without. You should be able to put some money away into savings each pay period, and this will be available for rainy days. The recommended amount for your emergency fund is six months’ worth of living expenses.