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Whether it’s a long-term situation or something you hope will be temporary, when you find yourself unemployed, it can be a really stressful time and your finances may be under a lot of strain. 

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Many people experience unemployment, and they may be wondering: does being unemployed affect your credit score?

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Your credit score is a numerical value that summarises your credit history and gives you an idea of how creditworthy you appear to potential lenders when you apply for credit cards, loans and mortgages. Your score is calculated by the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion.

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If you want to check your credit score, you can take a look at each of the three CRAs, for free and without affecting your credit score, using these great sites:

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ClearScore (uses Equifax data)*

Credit Club (uses Experian data)

Intuit Credit Karma (uses TransUnion data)

*For transparency, we wanted to let you know that ClearScore pay us a small commission if you sign up using this link.

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Does unemployment affect credit scores?

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No, simply being unemployed will not directly affect your credit score. Experian, Equifax and TransUnion do not use employment status when calculating your credit scores, so they won’t be impacted just because you are out of work. 

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The only reason an employer will appear on your credit report is if you’ve previously listed them as part of a credit application.

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However, being unemployed could indirectly impact your credit score. If you’re struggling financially, you might be more likely to miss payments or max out any credit cards you own. This of course can hurt your credit score because that sort of activity is listed on your credit report and can have a big impact.

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Also when you apply for credit, lenders often ask for your occupation and salary. If you’re unable to answer these questions because you don’t have a job or an income, some lenders will be unable to accept your application. Or perhaps they will limit which products they can offer you. That’s because you will be seen as a ‘higher risk borrower’ (even if you’re fantastic at managing your money).

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Does claiming unemployment benefit affect credit scores?

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Claiming unemployment benefits itself isn’t recorded on your credit report, so that won’t directly lower your credit score. 

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But, if you get behind on payments as a result of being unemployed, that will be recorded on your credit report and could affect your score. Read more here about how missed payments, defaults or County Court Judgments could affect your credit score and for how long, here.

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So, how can unemployment affect credit scores?

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To answer the question: does being unemployed affect your credit score? Overall, the answer is no. Unemployment doesn’t directly affect your credit scores, but it can impact it indirectly. If you're worried about how unemployment is impacting your credit score, be sure to stay on top of your finances and seek help if needed.

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We all know that being unemployed is challenging so even with your best efforts, you could find that you need to give your credit score a boost while you’re looking for work. But don’t panic. Help is out there!

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The quickest way to build your credit score is by starting your membership with Loqbox for access to Loqbox Grow, Loqbox Save and Loqbox Rent all for just £2.50 a week. You could see a credit score increase of up to 300 points in the first three months while using all of three products.

But we also have a Lite membership option to give you access to Loqbox Save for free — letting you build your credit score while you save a pot of money. Simply choose to open a bank account with one of our partners to which you can withdraw the funds at the end in order to keep it cost free.

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Improvements to your credit score are not guaranteed. 

As with any credit agreement (whether it’s a mortgage or a phone contract) your overall financial behaviour counts, but you can read more about the golden rules for knowing what affects your credit score and how you can improve it here.