Know – How Losing a Job May Impact Your Credit Score!

Losing your employment may be traumatic. It can impact aspects of your life negatively, particularly if you are a family’s sole breadwinner. An unanticipated lay off may create a lot of chaos in your professional and personal life, propelling you to simply reset your priorities for your future. You may even require reevaluating your expenditures and modifying your lifestyle till you acquire financial independence as well as employment again.

While it is normal for you to concentrate almost exclusively on figuring out a new job, there is usually a neglected impact upon losing your job. Ensure to consider this even. Not many are aware of the fact that losing out a job & long unemployment may have a detrimental effect on your score. To clarify, your score considers your previous debt and loans and repayment history but does not show if you are unemployed or employed. Thus, your score is not affected by your employment loss till you are able to repay all your loans and debts by the due date. 

Your credit score is compiled by 4 major credit score agencies called Experian, CIBIL, Equifax and CRIF HighMark. When forming your report, such agencies involve your credit card and loan info for the last 7 years. While your report does not contain employment record status, personal income or work history, the actual truth is losing employment enhances the chances of EMI default, which on the whole lowers your credit score. You can conduct your CIBIL score check online free by visiting the online financial platforms. Such platforms provide 1 free credit report every month. Also, if you are looking to check your company’s CIBIL score, you may check the commercial CIBIL score by visiting the online financial platforms as well. 

How does your credit score impact your job search?

Your credit score may even affect your employment search, so it is necessary that you maintain a strong score to gain employment. The importance that the employer endows on your score depends on the sector and organization type. Specific organizations might not also authenticate your score as it will not impact the result of the employment decision. However, few sectors, such as finance and banking, factor in a strong credit score essentially important while factoring in the candidate. 

Here’s a breakdown of a few industries that may consider your score while hiring the employees – 

Finance and banking sector –

A credit score is an important aspect for organizations in the finance and banking industry. Consumers in such 2 industries are anticipated to make the payment on time and maintain a good score. Hence, employers prefer to hire individuals who value the same ethics. Owing to such parameters, a bad credit score can hamper your employment scope in this specific industry. 

Jobs having financial responsibilities – 

How well you can manage your personal finances is one of the crucial benchmarks that employers consider when hiring you for this position. Candidates having low credit scores are usually not hired for the credit collection, cashier, accounting positions etc., even in sectors not linked with banking or finance. 

When your overall debts exceed your salary – 

If an employer finds out that you hold substantial debt that surpasses your salary, then they may not hire you for the position, given your irresponsible behaviour towards finances. 

Does your income impact your score?

Your credit score is an important parameter that decides whether you would get the loan; however, does this get impacted by your income level? 4 massive credit scoring agencies do not enlist your salary anywhere on your report. However, multiple credit scoring systems call attention to all your finances involving your current and previous income. In such credit reports, you may witness a lower or a weaker score. 

Loan approvals depend upon various parameters involving your credit score, your monthly earnings, and other parameters. Financial institutions and banks see your DTI (debt to income ratio), your credit and loan history, repayment structure, debt situation and currently applied loans when assessing your credibility. While approving your loan, lenders look at your income, and in these cases, insufficient earnings may impact your repayment potential. 

Will you face trouble qualifying for a job due to a poor credit score?

Often job seekers are turned down for reasons such as no experience or confidence, but in a few cases, their personal finances may even play a major role. For most of the job profiles, particularly the high-level job positions, employers consider going through your credit history. Employer checks for your credit to judge your credibility concerning finances. As per records, almost one in ten workers claim they were denied a good job owing to poor credit scores. 

A potential employer may use any of the 4 major credit bureaus to conduct credit checks. Also, they may hire an outside 3rd party agency to conduct a thorough credit check. One more report found that in many organizations that conducted background checks on the candidates, almost 31 percent included credit info checks and another financial info check in the report.  

What is a bad and good credit score?

A credit score is the decision-making medium that assists banks and various other financial institutes in deciding your loan repayment capacity. They even are known as risk scores because they assist lenders in evaluating whether the applicant will be able to repay the debt on time. A strong credit score is important because it assists in deciding whether you are eligible for the loan.

Cibil Score range anywhere between 300 and 900. It is dependent upon the info in your report formed by the credit bureaus. The number is valuable to the lenders to evaluate your loan repayment capabilities before providing the loan. A credit score of 750 or more is usually thought to be an excellent score, while a score of below 750 is considered bad. To improve your score and thus your employment potential, you must undertake good credit habits or behaviours.

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