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Having a job doesn't automatically increase your credit score—or impact it at all. The name of your current and previous employers can appear on your credit report as identifying information, but it isn't used to calculate your credit score and your employment status doesn't appear on your credit report.
Lenders do collect employment and income information from you directly when you apply for a loan or credit card, however, and they use this information to evaluate your creditworthiness. Here's what you need to know about how employment affects your access to credit and what factors impact your score.
Having a Job Has No Impact on Your Credit Score
Your employment status isn't a factor in your credit score. That means that getting a new job or increasing your salary won't improve your score. It also means that you can rest assured that entering a period of unemployment or having your wages reduced won't hurt your credit score either, all other things being equal.
You may notice that the names of past and present employers appear on your credit report. When you apply for credit, you supply lenders with information such as your employer (or self-employment status), length of employment, position title and income. Lenders may in turn provide your employer information when they report your account information to the credit reporting agencies. But employer names are not required on a credit report and should not be considered a full employment history.
How a Job Impacts Your Ability to Get Credit
Your job doesn't directly impact your score, but there are a couple ways employment can affect your ability to get credit.
Lenders consider your employment and income information when you apply for a credit card or loan. Different lenders have different minimum income requirements for eligible borrowers. Mortgage lenders specifically look at your debt-to-income ratio (DTI), or your monthly debt payments divided by your monthly income, as a measure of your capacity to take on more debt. A lower DTI suggests that you won't struggle to manage monthly payments and pay back what you owe.
Employment could also indirectly impact your ability to access credit if your employment status creates an obstacle to managing credit effectively. For example, if you go through a period of unemployment and loss of income, you may struggle to make debt payments on time. Or, you may apply for multiple credit cards in a short period of time or max out the credit cards you already have. Each of these credit behaviors impacts your score (more on this below).
But it's important to note that these credit mistakes aren't inevitable and that simply losing your job won't directly hurt your score. You can avoid damaging your score in a financial crisis by continuing to make on-time payments or reaching out to your lender to ask about hardship programs. In addition, an emergency fund can help you avoid racking up debt in the event of loss of income.
Factors That Affect Your Credit Score
Lenders use your credit score to predict how likely you are to make on-time debt payments, with a higher score representing experience and skill in managing credit and a lower score indicating risk.
These five credit factors make up your score:
- Payment history: The most important factor in your credit score is whether you make on-time payments. Frequently making late payments or missing payments altogether can greatly impact your credit score and ability to get new credit. Payment history makes up 35% of your FICO® Score☉ , the credit score used by 90% of top lenders.
- Credit utilization: Lenders look at your credit utilization rate, calculated by dividing your total revolving credit balance by the total amount of revolving credit available, to gauge your reliance on debt. High credit utilization, usually in the form of high credit card balances, equates to higher risk and can hurt your credit score. Credit utilization is responsible for 30% of your FICO® Score.
- Length of credit history: The age of your oldest account, the age of your newest account and the average age of all your accounts are measures of your long-term experience managing credit. Credit history makes up 15% of your FICO® Score.
- Credit mix: A diverse mix of credit products such as credit cards, auto loans, student loans, personal loans and mortgages indicates to lenders that you have skill in managing a range of credit types. Credit mix accounts for 10% of your FICO® Score.
- New credit: The number of credit accounts you've opened recently, along with how many hard inquiries appear on your report, measure how often you apply for credit. Too many new accounts or recent hard inquiries can make you look risky to lenders. This category makes up 10% of your FICO® Score.
The Bottom Line
Switching jobs won't impact your score, but it's still essential to ensure information on your credit report is accurate. You don't need to worry if a past employer is still showing up on your credit report—that type of historical information won't affect your credit and can help identify you. You can file a dispute if you find inaccurate information on your report, however, since it can be a sign of fraud.
Stay in the know about any new information in your report by signing up for free credit monitoring with Experian. You'll also have access to insights on what's impacting your score the most, plus suggestions on improving your score.