Losing a job in India can be stressful and a traumatic event. This scenario impacts all facets of your life substantially, particularly if you are the only earner in your family. Any unanticipated layoff may create a massive ruckus in your professional and personal life, propelling you to rework your priorities and come up with an ameliorated plan. Also, you may require reevaluating your expenditures and based on this adjust your living standard till you acquire financial freedom and a job again.

While it is normal to concentrate exclusively on getting a new job, there is usually a neglected impact of losing your employment that you should even counter. Not many are aware of the fact that doing away with a job as well as long periods of joblessness can detrimentally affect your credit profile and credit score. Just to provide clarification, your score considers your previous loans as well as debts, and repayment history, however, it doesn’t reflect your employment status. Thus, by job loss, your credit score is not at all affected until you repay all your loans or debts by the due date.

Your credit score is compiled by the top 4 top credit bureaus of India namely – CRIF HighMark, Equifax, Experian and CIBIL. When preparing your credit report, such agencies involve your credit card and loan info for the last 7 years. While your credit report does not contain any kind of employment record status, personal income or work history, the fact is that not having a job may enhance your likelihood of defaulting on loan EMIs, which ultimately reduces your credit score.

How does your credit score impact your job search?

Your credit score can even affect your job search, so it is necessary that you maintain a strong credit score to gain good employment. Many organizations may factor in your credit score to decide your job eligibility. Specific organizations might not even authenticate your score as it will not impact the outcome of your employment decision. But there are certain sectors like finance and banking that consider a strong credit score to be an essential factor when considering your candidature.

Here’s a rough breakdown of a few of the sectors that may factor in your credit score for hiring you –

Finance and banking sector –

A credit score is an important parameter for companies in the finance and banking sector. Customers in these 2 sectors are expected to conduct on-time payments and maintain a strong credit score. Hence, the employers too may prefer hiring you who value similar ethics. Owing to this factor, a low credit score can negatively impact your employment scope in the industry.

Financial and job responsibility –

How well the candidate manages personal finance is a crucial benchmark factored in by employers when hiring for your position including financial responsibilities. Those candidates with low scores are usually hired for credit collection, accounting positions, cashiers etc., even in sectors not linked to banking or finance.

Debt surpass salary

In this case, if an employer figures out that you hold considerable debt exceeding your income then that may hamper your chances of availing a position or the job you are looking for.

Does your income impact your score?

Your score is a crucial parameter that decides whether you would get the loan, however, does this impact your income? 4 crucial credit ratings in India do not mention your salary anywhere on your report. However, a miscellaneous credit scoring system calls attention to your finances involving your present and past income. In these reports, you may notice a weaker or lower credit score.

Loan approvals depend on various parameters like your credit score, your monthly earnings, and others. Financial institutions and banks look at the DTI (debt to income) ratio, your repayment pattern, loan and credit history, debt situation and currently applied loans at the time of assessing your credibility. When approving a loan, lenders consider your income and, in such cases, inadequate earnings may impact your loan repayment potential.

Can a job be denied owing to a poor credit score?

Mostly jobseekers get rejected for a job owing to reasons such as lack of experience or confidence, however, in a few cases, their personal finances may even have a major role to play. For many job profiles, particularly the high ranked positions, employers often prefer to conduct an in-depth check of the credit history. The credit checks by the employer have a substantial impact on the applicants and as per records, nearly 1 in 10 claims that they face rejection owing to heavy debts, while 1 in 7 was found rejected owing to bad credit history.

Potential employers can use any of the 4 major credit rating bureaus for a prospective credit check. Also, they might select to hire an outside 3rd party for an in-depth credit check. One more report stated that out of companies who conducted background checks upon candidates, around 31 percent include credit info and other financial info in their reports.

What is meant by a bad and good credit score?

Credit scores are nothing but decision-making instruments that assist banks and various other financial institutes to decide your credit history and loan repayment potential. Also, they are known as risk scores because they assist lenders to evaluate whether the applicant will be able to conduct the debt payment. A strong credit score is important as it assists in deciding whether you hold the eligibility for a loan.

Your credit score is nothing but a 3-digit number that ranges anywhere between 300 and 900. It is basically dependent upon the info in your report formed by CIBIL. The number is valuable to the lenders to evaluate your loan repayment potential before offering the loan. A credit score of 700 or more is usually thought to be good while a score of over 750 is considered excellent. Anything below 700 is looked upon as average and such scores are even deemed as poor.