Money Goals

Job status and credit score: Does changing job affect your credit score?

Nov 17, 2022

Whether you’ve recently landed a new job, unfortunately lost your previous one or you’re making ends meet some other way — you might be wondering if changing jobs can affect your credit score, and, you may want to know if your employment status or your income will impact on your ability to borrow money.  

The good news is that the UK’s three main credit reference agencies (CRAs) – Experian, Equifax and TransUnion – don’t include your job status or income when they calculate your credit score. Nor will it show your salary, job title or employment status. So, does it even matter?

Well, yes it does! While your credit score doesn’t hold information about your income and employment status (including job role changes or redundancy), lenders will often ask you for that information directly when you make an application for credit. Your creditworthiness is then established using these details alongside your credit score.

Does losing your job affect your credit score?

It’s important to know that losing your job has no impact on your credit score directly. Even if it turns out to be the best thing that ever happened to you (which can be true more often than you’d think!), it can be a real curveball.

So although it’s tough to lose your job, if it does happen to you, at least knowing that it’s not recorded on your credit report should be one less thing to worry about. 

While your credit score won’t drop because you’ve lost your job, falling behind on your payments definitely will have a negative impact. Becoming unemployed therefore isn’t the issue, it’s how you manage your finances when your situation changes that matters to your credit score.

Does not having a job affect your credit score?

Beyond losing your job, you might be wondering whether not having a job at all will affect your credit score? In brief, it doesn’t. At least not directly.

Your credit score doesn’t know if you’re employed or unemployed, or if you’re self-employed. However, creditors will ask for your employment information and income as part of your application. They will make a decision on your risk level by looking at your income and your expenditure. This is also known as your debt-to-income (DTI) ratio. You can read more about DTI in our blog.

Unemployment could be a problem if you want to apply for credit. But the issue won’t be with your credit score. It will be with your affordability according to the lender. Always consider whether borrowing money is the best option for you at the time. The reason affordability is checked by lenders is to safeguard against giving more debt to people who might not be able to manage repayments.

If you’re unemployed, you might be getting financial help from the government. But if you’re concerned whether job seeker's allowance affects your credit score — no, don’t worry. But if you are receiving job seeker’s allowance you might have a low income, which could fall below the minimum requirement set by lenders for credit cards and loans.

Will my credit score affect my job application?

So we know that your employment status doesn’t directly impact your credit score. But what about the other way round? Can your credit score affect your job or job offers you get? You can read more about pre-employment credit checks in our blog. Your credit score could be checked by a potential employer as part of an identity check, but your numerical score isn’t looked at. 

It used to be that credit checks were only made if you were applying for a job in finance, or one that gave you access to large sums of money. But it is increasingly becoming a part of pre-employment checks.

The three main reasons that an employer will check your credit report are to:

  • Check your identity and your address against your electoral roll registration
  • Check your trustworthiness if your job will give you access to large sums of money
  • Check your organisational skills against your ability to manage your finances

If your potential employer does check your credit history, the information they can see is limited. It only counts as a soft credit check. That means that it won’t temporarily reduce your score.

It also doesn’t show detailed information about your financial history. Instead, they can only see public information such as County Court Judgments (CCJs), bankruptcies and your electoral roll registration. 

Does being self-employed affect credit scores?

The good news is that self-employment doesn’t directly impact your credit score, either. Just as getting a new job or losing your old job doesn’t show on your credit score, the same is true if you’re self-employed!

Lenders like consistency. So lending credit to a person who is self-employed can be seen as riskier than a salaried position. This is mainly because you may not have a long track record to prove that you can uphold this style of employment. And if you do have the track record, you might have irregular income with late invoice payments or some months returning larger sums than others.

If this is your situation, it’s a good idea to make sure your credit score is as high as possible so that you can show your creditworthiness.

How to improve your credit score if you’re unemployed or self employed?

So, while your employment status won’t affect your credit score, your credit score can definitely help you out if you’re unemployed or self-employed.

You might find boosting your credit score can be a bit more difficult in these circumstances. But that’s where we’re here to help! Loqbox is proven to build your credit score by maximising the things you’re already doing:

  • Boost your credit score by 125 points in six months (on average) with Loqbox Grow
  • Save a pot of money and grow your credit score at the same time with Loqbox Save
  • Use your regular rent payments to build your credit history with Loqbox Rent

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