Losing a job can shake your finances, but it doesn’t have to damage your credit score. A good credit score is your financial backbone—it affects your chances of getting loans, credit cards, or even a new job. Protecting your credit score should be a top priority if you’re going through unemployment.
Thankfully, maintaining a healthy credit score during this challenging phase is possible with some practical steps. Let’s explore how you can handle your credit smartly even when your income stops.
Why Your Credit Score Matters Even More When You’re Jobless
Your credit score is a three-digit number that shows how reliable you are. It affects:
- Your eligibility for new loans or credit cards
- The interest rates you’ll be offered
- Your ability to rent a house or buy a car
- Even your employability—some companies check credit reports for specific roles
If your score drops due to missed payments or overuse of credit, it could cause long-term financial problems. So, even if you’re not planning to borrow right now, protecting your credit score can give you more options when your situation improves.
1. Stay Aware of Your Credit Report
Your first step is to know where you stand. Check your credit report from all major bureaus like CIBIL, Experian, and Equifax. In India, you can get one free report per year from each bureau.
Why this matters:
- You’ll know your current score and spot any errors
- You can take action before any late payments show up
- Helps you understand what factors are affecting your score
You can request your reports from:
2. Prioritize Your Loan and Credit Card Payments
You must not miss EMIs or credit card payments even if your income has stopped. One missed payment can lower your score by 50 to 100 points and stay on your report for years.
Here’s how to manage payments:
- List down all your EMIs and due dates
- Use your savings or emergency fund to pay at least the minimum amount
- Call your bank and ask if they offer EMI deferment or restructuring
Some lenders allow temporary relief options like:
- EMI pause for 3–6 months
- Reduced interest rates
- Longer repayment periods
Ensure you get everything in writing and ask how it will affect your credit report.
3. Avoid Taking New Debt Unless It’s Necessary
Avoid applying for new loans or credit cards unless needed during unemployment. Every application results in a hard inquiry, which can lower your credit score.
Adding new debt while you have no income can worsen your situation later. Instead, look at these alternatives:
- Borrowing from friends or family at interest-free rates
- Selling unused assets for cash
- Taking a secured loan against a fixed deposit or gold (with lower risk)
If you must borrow, choose low-interest options and avoid payday loans or credit card advances.
4. Use Your Credit Cards Wisely
Credit cards can be helpful tools during unemployment, but only if you manage them well. Follow these innovative practices:
- Pay at least the minimum due to avoid late charges
- Keep your credit utilization below 30% of your total limit
- If possible, use multiple cards lightly instead of maxing out one card
For example, if your total credit limit is ₹1,00,000, keep your monthly usage under ₹30,000. This will help keep your credit score healthy even if you’re relying on credit temporarily.
Also, avoid closing old credit cards as they affect your credit age, another key factor in scoring.
5. Talk to Your Lenders Early
Many banks and NBFCs now have hardship programs for borrowers facing unemployment or illness. If you explain your situation early, they may:
- Offer a temporary grace period
- Reduce your EMIs for a few months
- Restructure your loan without marking it as a default
Doing this before missing any payment can save your credit score from taking a hit. Be honest and proactive when you speak with them.
6. Consider Using Emergency Funds for Credit Payments
If you have any emergency funds or savings, use them wisely to maintain your credit. Your credit score can take years to rebuild, while emergency funds can be rebuilt once you have income.
Use your funds in this order:
- Essentials like rent, food, and utilities
- Loan EMIs and minimum credit card dues
- Other necessary bills, like insurance premiums
Avoid using credit for daily expenses. The risk of missing payments increases once you start depending on credit for essentials.
7. Avoid Co-signing Loans During Unemployment
Even if a close friend or family member asks you to be a co-applicant or guarantor, avoid agreeing when you’re unemployed. If the borrower defaults, your credit score will suffer, and you’ll become legally responsible.
Instead, help them in non-financial ways if possible, but do not put your credit history at risk when your financial situation is uncertain.
8. Take Up Short-Term Gigs to Cover Expenses
While you’re searching for full-time employment, consider part-time or freelance work. Income from these can help cover your minimum dues. You can try:
- Online freelancing (writing, designing, tutoring)
- Delivery jobs or driving apps
- Consulting in your previous field
Even a small income can reduce your dependency on credit and prevent damage to your credit score.
9. Set Up Auto-Pay and Payment Alerts
Use digital tools to stay on track with your due dates. Most banks and apps allow:
- Auto-debit of minimum dues
- SMS or email reminders
- UPI-based payment links for EMIs
This removes the risk of forgetting a payment, especially when dealing with other stress during unemployment.
10. Plan for the Future After Employment
Once you find a job again, take time to:
- Review your credit report for any score changes
- Start paying off any pending balances
- Rebuild your emergency fund gradually
A steady income will help you bounce back faster, but your efforts during unemployment will make recovery more straightforward and quicker.
