While it is not known to many, the truth is that being unemployed doesn’t hurt your CIBIL or other credit scores directly. Unemployment may hamper your income stream, but it is not a directly perceived criterion in your credit report. However, just because your credit score is not directly affected by unemployment, it doesn’t mean that it will have no impact on your financials and credit history.
Here are a few direct ways that unemployment can hurt your score and credit borrowing capacity in general:
- Delay in bill payment
If you are unemployed, it could become difficult to manage household expenses, house bills and pay credit card bills on time. This could lead to late or missed payments altogether, which will invariably end up affecting your credit borrowing capacity.
- Loans for unemployed individuals
Lenders and financial institutions do offer loans for unemployed people who are unemployed. In most cases it would be a secure loan i.e., the loan applicant will have to provide security or collateral to get that loan. This could also mean further dilution of assets if the loan is not paid on time and have a terrible impact on your credit history too.
- Increased dependency on credit cards
There is a chance that you might start relying more on your credit cards to pay bills and clear other expenses, which will heighten your Credit Utilisation Ratio (CUR). This ratio combines your revolving account balance from all your credit cards and other lines of credit you may have availed of and your credit limits. A higher CUR ratio will lead to a more significant impact on your credit scores.
- Multiple card dependency
If the credit card limit of your current card doesn’t suffice, you will end up applying for more and that will only lead to creating a bigger debt for you. This will also affect your credit score gravely.
Unsecured Loans for Employed
Yes, you heard that right. There are a few financial institutions out there that offer you a personal loan, which is an unsecured loan i.e., you do not have to provide any collateral or security to avail of it. Granted that the personal loans tenure and rate of interest would be different for income earners and unemployed people, but it will still get you financing in time.
Apart from not needing to offer collateral, you may also not have to produce a co-signer if you are applying for a personal loan with some lending institutions. However, you can do a free check of CIBIL score before applying for one as lenders may be willing to offer loans to people with a lower CIBIL score, but they do not entirely ignore it either.
Remember always to check your credit score and CIBIL score to understand your credit position in time to rectify it. If you want to calculate your credit score i.e., do a free check of CIBIL score, then Finserv MARKETS can help you check your score in no time. Additionally, you can also learn about different ways to help increase your score and the criteria that different lenders have for loan applicants.