Credit Infocenter

How Will Unemployment Affect My Credit?

June 30th, 2020 · Credit Repair

If you’ve been laid off recently, the last thing you will want to worry about is how your credit report will be affected by this temporary situation.  There is good news and bad news for you.  First the good:  your credit score will not be directly affected by your lack of employment.  The bad:  your lack of income could affect your ability to pay your bills and therefore your credit score could be impacted negatively.  Let’s go over each of these points.

Your credit score will not be directly affected

Your credit report contains personal information about you, such as your name, social security number, your address and where you work.  If you are temporarily unemployed, this information will not appear on your credit report, so any lender who takes a look will not know about your financial setback.  Your employment information is only updated when you apply for new credit and list your employer on the application.  This information is not retrieved from the IRS or any government entity.  You may see a list of past employers on your credit report, but there are no dates on any of this information.  

Your employment history will not affect your credit score at all.  

In addition, any compensation you receive as part of your unemployment benefits will not appear on your credit report.  Indeed, your salary or wages for any job you do will not appear on your credit report, ever.  

How unemployment can indirectly affect your credit score

Lowered income can affect your credit score in three ways: 

  1. Lowered income can affect your ability to pay your bills.  

If your income declines dramatically, which is safe to say happens in the majority of cases (except in rare cases where some people have received more money than lost wages under the 2020 CARES Act), your ability to pay bills might be affected.  If you are late on making payments to lenders and credit card issuers, this will affect your credit score.  

35% of your credit score is based on payment history, that is, if you pay your bills on time (no later than 30 days from the due date). If you currently enjoy a high credit score (a high credit score is anything greater than 780 (based on a range of 350 – 850), making even one late payment can send your score tumbling down.  As part of the CARES Act, there was no provision put into law that will exempt late payments (whether or not they will count against you) which happened due to the Covid-19 pandemic.  

  1. Your credit utilization could go up.

Credit utilization is 30% of your credit score.  If you use your credit cards to help make up for the shortfall in income, you could see your credit utilization rise.  Your credit utilization is the ratio of your balance to your total credit line per creditor.  The general guideline is to keep your credit utilization below 30%, and optimally below 10%.  The more money you charge on your credit cards, the higher your credit utilization.  Maxing out even one credit card will seriously impact your credit score.  

  1. You could open up new lines of credit.  

Opening new lines of credit could affect your credit score.  On one hand, the credit scoring model reacts favorably to new lines of credit being added to your credit report (10% of your credit score) – up to a point.  Every time you open up a new line of credit an inquiry is placed on your credit report, and this can reduce your score by 2 to 5 points, on average.  In addition, new credit reduces the average age of your credit lines and this is 15% of your score.  

Can you apply for new credit when you are unemployed?

The answer is yes, there is nothing stopping you from applying for new credit.  However, lenders and credit card companies will require you to put down your income on the application.  If you are getting a mortgage of any kind, whether it’s an equity line of credit or a refinance, you will be required to verify your income through documentation.  Credit card companies will generally not require you to verify income; auto lenders will generally not require you to verify income if you have great credit and you are putting down a large amount of money.  

If you are unemployed, taking on additional financial responsibility is probably not a good idea – if you are having trouble paying your existing bills, adding to the monthly total may not be in your best interest.  

If you are having trouble paying your bills and absolutely need a line of credit to make it through your crisis, consider getting a personal loan at a credit union, as they typically are more lenient with their credit guidelines and have lower fees.  If this is not feasible, making a budget and cutting back on spending is the way through to getting you back on your feet.  

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How to Avoid Having Your Credit Be Negatively Affected by Covid-19

April 6th, 2020 · Credit Repair

With 3 million people applying for unemployment benefits in the past week, you can be sure many of these people are worried about how they are going to be able to pay their bills.  As we all know, if you fail to make payments on loans, your credit score will be affected negatively. What can you do to protect it?  

The latest stimulus package passed into law almost had a provision in the law that would not allow credit bureaus to report non-payment of bills for 4 months.  That would have gone a long way in helping to stave off the ill effects. In the absence of this amendment, some banks and credit card companies have all expressed their willingness to work with consumers hard hit by job loss due to the global pandemic.  

If You’ve Lost Your Job

Contact your creditors. Many credit card companies are willing to allow you to delay payments if your ability to pay has been affected by the pandemic. However, this delay in payment is not automatic.  The same applies to mortgage companies – many have signaled their willingness to work with the public and potentially delay your mortgage payments for up to 12 months. The payments would be added to the end of the loan so you would still need to make them.  The same with interest on credit cards, it will still accumulate while you are delaying or missing payments.  

Make the minimum payment on your credit cards. While you should always strive to make the full payment amount on your credit cards, making the minimum payment will guarantee that you will not get a bad mark on your credit report.  In addition, you will be avoiding racking up the maximum interest on your credit cards.  

If you’re receiving a stimulus check from the government, resist the temptation to purchase something that’s been on your wish list and instead concentrate on paying existing bills.  

If You’re in a Deferred Payment or Forbearance Plan

Lenders must notify the bureaus if a customer has been placed in a special program.  The notifications ensure that these programs will not hurt a consumer’s credit report.  Both FICO and VantageScore, the companies behind the credit scores used in lending decisions, have publicly stated that people in forbearance or deferred payments plans will not see their credit scores suffer.  

Pull your credit report from  Make sure that no black marks are being reported on your credit score.  If you’ve already used up your one free credit report for the year, you can join free credit score monitoring services such as and  Make sure your credit scores are not being affected by your deferment or forbearance programs.

Make sure you are not being charged a late fee.  Credit card companies charge up to $39 dollars if you are late on a payment.  People in forbearance of deferment programs should not be charged fees for missing payments.  

If You Must Dip into Savings

Make a budget.  Those savings were built up carefully, so make sure that they last as long as possible.  Getting into a habit of having a budget now will help you to build up those savings once you get back on your feet with a new job or increased income.  

You can take up to $100,000 from your retirement accounts without penalty.  As part of the new stimulus bill, the 10% penalty normally assessed when you take money out of your 401K or IRA accounts is now waived.  Be careful doing this though as the markets are down now, you may have to withdraw more money than you would have to make your expenses, missing out on the opportunity for stocks to go up.

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What Does “Credit Repair” Mean?

January 17th, 2020 · Credit Repair

Our world deals in credit. We pay for just about everything with cards rather than cash. When you pay for something with a card, that card is either linked to your bank account or to a credit account. A card linked to your bank account is called a debit card, while a card linked to a credit account is known as a credit card.  

So what exactly is credit and why would it need to be “repaired?” Let’s take a look at the answers to these questions and others relating to good and bad credit.

What Is Credit?

Credit is the name given to a trust that exists between a money lender and a money spender. When the lender provides the spender with money, it’s with the understanding that they’ll receive payment at a later date. 

Opening a line of credit gives you access to a certain amount of money through a credit card. You can build up good credit in several ways, including making your payments in full and on time. Bad credit can develop as you miss payments or only make partial payments among other things.

Learning How to Repair Credit

Learning how to repair credit isn’t difficult, but it does take time and patience. First, you need to know your credit score. A score of 550 or lower is considered poor, while around 700 is good, and above 800 is excellent. 

How Do You Know If You Have Bad Credit?

There are a couple of ways to know if you have a bad credit score. One is to evaluate yourself: are you making your credit card payments in full and on time? If the answer is no, you likely have a poor credit score. 

One way to know for sure where your credit score sits is to get a copy of your credit report and credit score. There are three nationwide credit reporting companies: TransUnion, Experian PLC, and Equifax. Everyone is entitled to one free copy of their credit score and report from each of these companies every twelve months. 

You can submit a request for your credit score and report online, through or over the phone at 1-877-322-8228.

How to Repair Bad Credit

If you have poor credit, try doing the following to improve it:

  • Pay outstanding credit card balances. Do what you can to dig yourself out of large amounts of debt and stay on top of your payments. 
  • Pay bills on time. Show your creditors that you can be trusted with their money.
  • Review your credit score. Know exactly what your score is and where you stand.
  • Dispute negative marks or incorrect late-payment entries. People make mistakes. Some of those mistakes could be negatively impacting your credit score.
  • Increase credit card limits. If you’re maxing out your credit limit every month, that will damage your credit score. Call and ask your credit card company if they can increase your credit limit. 
  • Open another credit card account. But don’t use this card. Opening another account will help to increase your credit limit on your current cards.
  • Don’t close old accounts. Even if you haven’t used a credit line in years, closing that account could impact your credit score negatively. If you need to close an account, close a new one before you close an old one. 

Why You Need Good Credit

When you start making payments on outstanding debts racked up on a credit card, you begin developing a credit score. A credit score is a numerical value given to a person’s credit files. It represents the person’s creditworthiness.

Put simply, if you have a good credit score, lenders will be more likely to give you loans when you need them. Looking to buy a house? Good credit will help you get a better deal on a loan. Thinking of getting a new car? Good credit will help there too! 

Contact our partner Lexington Law for a free credit repair consultation today. We’re here to help you figure out how to repair your credit score.

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