Whether you realize it or not, being unemployed can not only put a strain on your emotions and day-to-day finances, but also your credit score.
A recent article from the consumer advice website, Wallet Pop, explained that there are several ways for the unemployed to run into credit trouble without even realizing it. Much of the problem can be related to credit card spending. Without a steady income, people who are out of work may come to rely on credit cards to make ends meet. But be careful, there are several ways this type of spending can cause serious damage to your credit score.
The largest part of your credit score is determined by how good a job you do paying your bills, in this case, your monthly credit card bills. It is important to have enough money in reserve, so you can pay at least your minimum amount due. Missing a payment will do sizeable damage to your score.
When you’re relying on your credit card to purchase essentials, it's easy for those expenses to add-up. It’s also common for people to resort to their credit card to pay for other monthly bills, such as utility bills or even mortgage payments, however when you’re spending this way you have to be careful not to max-out your card. Many borrowers don’t know that charging to your credit limit has a strong negative impact on your score.
As budgets stretch thinner, there may also be a temptation to take out more credit, but this too can be damaging too. Many loans given to consumers with deteriorating credit scores will carry penalizing interest rates, which could be problematic if you’re not paying them off each month. Plus, another factor in your credit score is made-up of how many new loans you have in your name.
These are tough times for a lot of people and lenders may be willing to work with you if you contact them and explain your employment situation.