Building credit can be difficult even in the best of times. If it was easy, credit scores would hold less value to lenders. Credit bureaus primarily keep track of your credit history so that prospective lenders can identify borrowers who are trustworthy.
Sometimes circumstances beyond your control can cause your credit to suffer or make it seem impossible to improve it. For instance, what would happen if you were unable to pay your bills after losing your job, possibly as a result of a pandemic?
Credit building shouldn’t be your first priority if you lose your job, according to Fit Small Business senior credit analyst Mike Cetera. “You should do the best you can to prevent credit harm instead. ”.
When you’re in between jobs, building your credit might not be your top priority, but there are things you can do to keep it from getting worse. You can work toward a more secure financial future by keeping track of your expenditures, making on-time bill payments, interacting with creditors, and taking other safety measures.
Losing your job can be a stressful and uncertain time, especially when it comes to your finances. While building credit may not be your top priority during this period, there are steps you can take to prevent it from deteriorating and even improve your score in the long run.
Here are 6 tips on how to build credit with no job:
- Pay Your Bills on Time: This is the most important factor in your credit score, and it’s crucial to maintain on-time payments even when you’re unemployed. If possible, continue making payments by their due date, as payment history accounts for 35% of your FICO score.
- Explore Unemployment Benefits: If you’ve lost your job, consider exploring your eligibility for unemployment benefits. This can provide a temporary financial cushion while you search for a new job and help you keep up with your bills.
- Manage Your Spending: Track your expenses and create a budget to avoid overspending and accumulating debt. Budgeting apps can be helpful tools for managing your finances during unemployment.
- Practice Responsible Credit Card Use: If you have a credit card, use it wisely. Avoid carrying a balance and aim to pay it off in full each month to prevent high-interest charges and maintain a good credit utilization ratio.
- Consider a Co-signer: If you have a friend or family member with good credit, ask them to co-sign on a loan or credit card with you. This can help you qualify for better terms and build your credit history.
- Utilize Experian Boost: Experian Boost allows you to improve your credit score by reporting your on-time payments for utility and phone bills. This can be a valuable tool for building credit, especially if you have limited credit history.
Additional Tips:
- Avoid opening new credit accounts: This can hurt your credit score, especially if you’re unemployed and have limited income.
- Seek help from credit counseling agencies: If you’re struggling with debt, consider seeking help from a credit counseling agency. They can provide guidance and support in managing your finances and improving your credit score.
- Be patient and persistent: Building credit takes time and effort, especially when you’re unemployed. Don’t get discouraged, and keep working towards your goals.
Remember:
- Building credit with no job is challenging but not impossible. By following these tips and staying proactive, you can improve your credit score and set yourself up for a better financial future.
- Maintaining good credit habits during unemployment can help prevent your score from deteriorating and make it easier to secure loans and credit cards once you find a new job.
Building credit with no job requires careful planning and responsible financial management. These pointers will help you get through this difficult time and come out on top with a higher credit score. Recall that it’s critical to be persistent and patient in your efforts, as well as to ask for assistance when necessary.
Practice responsible credit card use
You can use your credit card for necessary purchases if you have one, but watch how much you spend because it affects your credit utilization ratio, which is one factor in your credit score. In an ideal world, you would use no more than 200% of your credit limit and settle the balance in full each month. There is a grace period on credit cards, so as long as you pay the entire amount off, interest is not charged.
Opening a new credit card or your first one when you’re unemployed may seem strange, but if you’re only going to be using it for necessities, like groceries or rent, it might be a viable option. Make sure you have enough money each month to pay the bill in full to prevent worrying about interest or other fees. Secured credit cards are easier to obtain if you don’t meet the requirements for an unsecured card; however, the credit card issuer will need to receive a cash deposit.
Making responsible use of your credit card can help to improve your score, provided that you’re not carrying a balance and are using it appropriately.
If you already have credit card debt, it may be worth considering balance transfers:
However, this can be a risky approach when it comes to managing your debt and credit utilization ratio. You might be held accountable for all interest that would have accrued during the promotional offer period if you still owe money on the card after it expires. That is why it is crucial to read any credit card agreement carefully before signing.
You most likely won’t be asked to co-sign a new loan or credit card if you’re unemployed and having trouble with your credit. On the other hand, you could request to sign into one or more of your friends’ accounts if you know someone with a good credit history.
Adding yourself as an authorized user on someone else’s account is another approach to establish credit without having a job or even applying for credit, according to Tayne. “An account is added to your credit report when you are added as an authorized user.” ”.
Of course this means your use of the account could negatively affect the creditworthiness of the original cardholder. Because of this, it’s critical that they have faith in you and that you make sure they don’t regret it.
Pay those bills on time
Making on-time payments on loans and credit lines from lenders that report to the major credit bureaus is typically the best way to maintain or raise your credit score. However, it can be difficult to maintain your bills without a job or a reliable source of income.
Since your payment history is the primary determinant of your credit score, try to maintain making your payments by the due date.
“Continue to pay your bills the best you can,” says Leslie H. Tayne Esq. , founder and head attorney at Tayne Law Group. “Hopefully, you have an emergency fund you can draw from, even if it’s only to pay your minimums. ”.
Exploring your eligibility for unemployment benefits can assist in bridging that monetary gap during a job loss.
Tayne advises getting in touch with your lenders to explain your circumstances and address your employment status if you’re having trouble making your minimum payments. You might be able to postpone or make smaller monthly payments without incurring penalties.
Monitoring your expenses is a wise practice that can help you avoid having your debt-to-income ratio and FICO score negatively impacted.
When you’re jobless, it can be particularly challenging to manage your life and finances, so you might want to think about downloading a free budgeting app. As always, creating and adhering to a budget is sound personal finance advice, but it’s crucial when you don’t have a primary source of income.
Get Approved for a Credit Card With No Income or Job
FAQ
How can I improve my credit score if unemployed?
Can you get credit if you don’t work?
Can I get a credit card if I don’t have a job?
Can you establish credit without a job?
However, income can help you pay your bills, which contributes towards your payment history. So, you can still establish credit without a job. If you’re able to make your bills on time, you’ll be contributing towards your payment history—a highly weighted factor that goes into generating your credit score.
How can I improve my credit?
Late payments over **30 days** are reported to credit bureaus, so rectify any missed payments promptly. 2. **Get a Secured Credit Card**: Consider a **secured credit card** designed for
How can I Build Credit without debt?
Try a Credit-Building Debit Card If you’re thinking about opening a new checking account, the Experian Smart Money™ Digital Checking Account & Debit Card can help you build credit without debt by automatically linking to Experian Boost ®ø, which gives you credit for eligible bill payments after three months of payments.
How do I build credit if I have no credit history?
Sign up here. If you have no credit history, consider the following approaches to building credit: It can seem daunting at first to start building credit with no credit history, but it can be done with a few simple steps. Consider establishing credit with one of the best credit cards for building credit.