Article by Sam Griffin - 18th August 2020

Does Unemployment Show On Your Credit Report?

Since 2013, the UK unemployment rate had been steadily decreasing after recovering from the Great Recession. Now amid another global downturn, the risk of redundancy is rearing its ugly head as businesses around the country struggle to cope with the pandemic.

While the pandemic (and the subsequent impact on business) is the current major source of employment anxiety, unemployment is a worry for many even during ‘normal’ times.

Does Unemployment Show on your Credit Report?

Your employment status does not feature on your Credit Report in any shape or form. This is because information about your job is not reported to the Credit Reference Agencies (CRAs), so you can check your Credit Report and you won’t see any reference to your employment.

The same is true for any lenders checking your Credit Report as part of an application. By looking at your Credit Report alone, they will also not see whether you’ve recently been made redundant, held the same job for years, or have yet to enter the work force.

Due to this absence of employment information on your Credit Report, your job (or lack of) won’t directly affect your Credit Score or rating.

That is the simple (technically accurate) answer.

In practice though, any major shifts in your financial situation can have a knock-on effect, spilling over and damaging your Credit Report and Score. For most people, their job is their primary form of reliable income. Losing this will only increase the chances of damage to their Credit Report later on.

How can unemployment affect my Credit Report?

The health of your Credit Report is determined by many factors, but at its core, it depends on a long, consistent record of managing credit agreements well. This means having a range of credit accounts with perfect repayment history goes a long way in building a healthy Credit Report.

Anything that threatens your ability to consistently make scheduled payments full and on time can end up hurting your Credit Report. If you start missing payments as they fall due, which might be caused by sudden unemployment, your lenders will record each missed payment and share them with the Credit Reference Agencies, thereby placing them on your Credit Report.

Late payments are negative markers that damage your Credit Report, making it harder to get accepted for further credit. Consecutive late payments are known as arrears and these are even more serious. This harmful information can remain on your Credit Report for six years from the date of account closure.

In the worst-case scenario, where payments have been missed for an extended period of time, the lenders may default the accounts. A defaulted account is one that’s been closed due to non-repayment. The lender then commences recovery action to reclaim owed funds, which usually starts as telephone contact, but can end up as court action via a County Court Judgment (CCJ). Defaulted accounts and CCJs are severe negative markers that can damage your Credit Report for six years, from the date of issue.

In this way, unemployment can carry significant risk for your Credit Report. Ensuring that all payments remain paid on time is crucial to maintaining a strong Credit Report.

If you’re struggling with making payments, be sure to contact your lender to explain the situation. In addition to the government support for furloughed workers throughout the pandemic, the FCA has set out guidelines that regulated lenders must follow to protect the finances of their customers. If you’re a mortgage borrower and have faced financial loss due to the coronavirus, you should be eligible for a three-month payment holiday. Personal loan and credit card borrowers can similarly take a three-month payment deferral if affected by the pandemic. Be sure to contact your lender if this applies to you.

Employment and Affordability

We’ve covered how unemployment can affect your Credit Report, but the other side of the coin is how it affects your applications.

When assessing credit applications, lenders calculate your creditworthiness and affordability to determine whether you’re the right type of customer for them. Your Credit Report provides lenders with a measure of your creditworthiness – the likelihood that you will repay the amount borrowed. Information supplied on the application form allows lenders to calculation your affordability – your financial ability to meet the agreed payments.

While your Credit Report will not explicitly reference your employment status, your application will. Depending on the product that you’re applying for, you can be asked to name your employer, outline your salary and overtime and bonuses, and confirm how long you’ve worked there, among other things. Your income will be offset against your outgoings (which you also supply) to determine your affordability.

It goes without saying that losing employment will reduce income – but it’s not just the loss of immediate funds that can hurt your application. Lenders are not just focused on finding reliable, ‘low risk’ customers in the present, but also those who can maintain payments consistently into the future. This is precisely why they’re interested in how long you’ve been employed at the same job, as this demonstrates valuable stability in your financial situation. Sudden unemployment can be a red flag for lenders as it demonstrates a perceived level of ‘risk’, not just now, but in the future too.

Do Universal Credit and other benefits show on my Credit Report?

Just like your employment status, government benefits do not feature on your Credit Report. It is likely though that you’ll need to inform lenders that you apply with about any benefits as part of the application.

Your Credit Report is a detailed record of your financial situation, showing the information available to a prospective lender when it performs a credit check on you using one of the UK Credit Reference Agencies.

It includes your credit accounts and how they’ve been managed, your Electoral Roll listing, Court Records (such as bankruptcies and CCJs), Financial Associations, and more. The wealth of information found on your Credit Report is how lenders determine your creditworthiness – to see whether you’re the right type of customer for them.

As historic repayment behaviour is seen as an indicator of future repayment behaviour, lenders will scrutinise even the smallest details on your Credit Report, so you’ll want to check yours for yourself if you haven’t.

How do I check my Credit Report?

You can check your Multi Agency Credit Report with checkmyfile free for 30 days, then just £14.99 monthly. Cancel easily online, at any time.

checkmyfile is the only Credit Report to collect your complete information from Equifax, Experian, and TransUnion letting you easily see what a lender will see whenever you apply for credit.

The UK's First Provider Of Online Credit Reports

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