Web Extra: How to Manage Credit When You've Lost Your Job

Finding a job when you’ve lost yours is the hardest job you’ll ever have. That’s because, in addition to all the resumes, cover letters, interviews and fraught nerves, you’ve got your money and your credit to look after. You have to figure out how to keep bills up-to-date and your credit score pristine – and you have to do all that without any income.

You also tend to go from being a ‘cash’ consumer to a ‘credit’ consumer when you lose a job because you have to depend on savings and credit cards more. If this happens, there are three very important points to remember, courtesy of John Ulzheimer:

(1) Credit scores don't know whether or not you're employed because that info is not on your credit reports. This is good and bad news because you don't get a "pass" on any mistakes when paying/spending/applying for credit just because you're not employed. All rules remain the same. It's good news because ‘unemployment’ isn't considered negative by credit scores such as FICO.

(3) If you need/want to open a new card, do it before you become unemployed. Even though credit scoring models don't see that you're unemployed there are other scoring models that will. For example, most issuers use "application" models that take into account info from your credit application. This means when you put $0 in the salary space or you leave the "current employer" space empty, it will hurt you and can cause you to be declined. Banks do not like empty spaces on applications.

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