Life throws unexpected surprises; some are good and some are bad. Job loss is a traumatic condition as it temporarily shuts down your regular source of income. Though life does not end here and you manage to figure out ways to bear the tough time, it keeps you flustered unless you get a new full-time employment.
Unemployment throws you off balance when utility expenses, medical bills, credit card bills, and instalments flood in your mind. If you try to be reliant on loans for unemployed, most of the lenders will not approve of your loan application, but at the same time, most of the borrowers refrain themselves from taking out a loan, as they doubt that it may affect their credit scores badly.
There are a few factors that affect your credit score but they do not include unemployment. Your credit report consists of information of your credit and payment details. Your employment status does not appear on the report. You are eligible to take out a loan even if you do not have a full-time job provided you have another source of income. However, job loss can affect your score indirectly.
You will fall behind your repayments
Payment history contributes to 30% of your credit score therefore it is imperative to ensure you make all your repayments on due dates. After losing a job, you may be running short of funds that may cause obstruction to pay off a loan, credit card bills and all.
If you miss any payment, you will be levied late payment fees, and the default will be notified to credit bureaus if you fail to settle dues within the next 30 days. The more defaults you make, the higher interest you will pay. The higher interest you will pay, the higher burden your pocket will suffer from.
You will be reliant on loans to make your ends meet
Regular expenses do not halt even if you are out of work. Your credit card bills and utility expenses are waiting to burn a hole in your pocket. You may not have enough savings and government benefits to dip into and chances are you face extreme difficulty keeping the wolf from the door. Consequently, you will use your credit cards and take out a new loan.
Your credit score will go down if you miss any repayment. Make sure that you do max out your credit card limit as it is recorded on your credit report and you will lose your credit rating. As long as you consume only one-third of your credit card balance, your score will not plummet.
If you have taken out emergency cash loans, try to pay off on the scheduled date. These loans come with high interest rates that are the significant reason many borrowers fail to pay back the debt on time. In case of a default, you will not only make late payment fees but also lose your credit score.
You will make several loan applications
A few online lenders provide unemployed loans despite your bad credit history. When you lose your job, you recklessly apply at several lenders to get money at once. Wait, your move may take a toll on your credit score.
Each lender will visit your loan application and it will appear on your credit report. These hard inquiries make your creditworthiness doubtful. Lenders may interpret that you are in dire need of loans – perhaps you are not able to make ends meet without borrowing money. When you apply for unemployed loans, do not make several applications within a short time. You should wait for the approval of the lender.
During unemployment, you should make the most of your finances. A good credit score is not only important for getting a loan at a lower interest rate but also getting a job. Some employers hire employees who have been able to maintain a stellar credit history.