Does Your Job Affect Your Credit Score?

Whether you have a job or you’re unemployed, you might be wondering, does your job affect your credit score? This post provides you with everything you need to know about how your job affects your credit score.

Does Your Job Affect Your Credit Score?

Although the name of your employer may appear on your credit report, your job does not affect your credit score. Also, whether you’re employed or unemployed, your employment status does not appear on your credit report nor does it affect your credit score.

Having a job does not affect your credit score because even though your employer information may appear on your credit report, the credit scoring models do not take it into account when calculating your credit score.

For example, whether you’re an award-winning surgeon or a trash collector, your job has no impact on your credit score.

So, at this point, you might be wondering, where does the employer information on your credit report come from?

The employer information that appears on your credit report was likely provided by you on a credit application for a credit card or loan.

For example, if you went to a dealership and submitted a credit application for an auto loan if you list the name of your employer on the application, the dealership might provide your employer information to the credit bureaus. If the credit bureaus receive the name of your employer, it will be added to your credit report.

That said, your employer information has no effect on your credit score because it’s not indicative of how you have handled repayment of debt, so it’s not factored into your credit score.

So, even though you may have lost your job, your loss of employment does not affect your credit score. In fact, the fact that you lost your job does not even appear on your credit report.

Failing to Make Credit Card and Loan Payments On Time

That said, losing your job could indirectly affect your credit score. For example, if you don’t have enough money to make your credit card and loan payments on time, you could cause significant damage to your credit.

This is so because your payment history makes up 35% of your credit score. When you make your payments on time, this factor boosts your credit score. However, missing even a single payment on a credit card or loan could cause significant damage to your credit. So, try to continue making your payments on time to avoid having your loss of employment affect your credit score.

Becoming Too Reliant On Credit Cards

The second way that losing your job could affect your credit score is if you become too reliant on your credit cards.

If you end up using too much of your available credit limit, you could hurt your credit score because your credit utilization makes up 30% of your credit score. The more of your available credit you use, the lower your credit score will be.

As a rule of thumb, you should keep your credit utilization below 10% and never exceed 30%. If you use 30% or more of your available credit, you will notice a significant drop in your credit score.

So, if you’ve become unemployed, you should refrain from over-relying on your credit cards if you do not have a way of paying them back. This is so because you may increase your credit utilization, lowering your credit score.

Why Doesn’t Your Job Affect Your Credit Score?

Your job doesn’t affect your credit score because employers do not report your job to the credit reporting bureaus. In fact, there is no way for your employer to report your job to the credit reporting bureaus. The only reason your employer information may appear on your credit report is from a credit application that you submitted along with the name of your employer. Employment information and income information do not appear on your credit report. Even though your employer may appear on your credit report, it does not affect your credit score because the credit scoring models do not take into account your employer information.

What Does Affect Your Credit Score?

Now that you know that your job or lack of job has no impact on your credit score, let’s discuss some of the items that do affect your credit score:

  1. Payment History – Your payment history affects your credit score. In fact, it makes up 35% of your credit score and looks at whether your making payments on your credit cards, loans, and other types of debt. If you make all of your payments on time, this factor will boost your credit score. However, if you miss payments on credit cards or loans, you could cause significant damage to your credit. Missing even a single payment can lower your credit score by 100 or more points, so make sure to make all of your payments on time so that this factor positively impacts your credit score.

  2. Credit Utilization – Your credit utilization refers to how much of your available credit you’re using. Typically, the higher your credit utilization (the more of your available credit you’re using), the lower your credit score will be. As a rule of thumb, you should keep your credit utilization below 10% and never exceed 30%. If you use more than 30% of your available credit, you will notice a significant drop in your credit score. So, keeping your credit utilization low is important as this factor makes up 30% of your credit score.

  3. Age of Accounts – The average age of your accounts makes up 15% of your credit score. The older your accounts, the better your credit score will be. So, if you have old accounts that are open, such as an old credit card, you should keep it open so that it continues to provide a boost for your credit score.

  4. Credit Mix – Your credit mix refers to the diversity of accounts on your credit report. It makes up 10% of your credit score. Typically, this factor rewards those who are handling different types of debts, such as credit cards, car loans, student loans, and mortgages. The more diverse your accounts, the better your credit score will be.

  5. New Credit – New open accounts and hard inquiries account for 10% of your credit score. The older your accounts and the less hard inquiries you have on your credit report, the better this factor impacts your credit score. Whenever you submit a credit application, such as a credit card application or loan application, a hard inquiry is added to your credit report, slightly lowering your credit score. Although a single hard inquiry will not lower your credit score by much, if you accumulate too many hard inquiries within a short period of time, you will significantly lower your credit score.

Frequently Asked Questions (FAQs)

1. Does being unemployed hurt your credit score?

No, being unemployed does not hurt your credit score because the fact that you’re unemployed does not appear on your credit report, therefore, it has no impact on your credit score.

2. Does having a job affect your credit score?

No, having a job does not affect your credit score. That said, having a job can help you make your credit card and loan payments on time, boosting your credit score.

3. Does having a job increase your credit score?

No, having a job does not increase your credit, but if you do use your income to pay your credit cards and loans on time, you can improve your credit score. This is so because your payment history makes up 35% of your credit score, so making your payments on time can provide a nice boost to your credit score.

4. Is your employment status listed on your credit report?

No, your employment status is not listed on your credit report, therefore, it does not affect your credit.