FICO scores consider a lot of different personal information found in your credit reports, but employment history isn't one of them. In fact, according to FICO, "your salary, occupation, title, employer, date employed and employment history" are never considered by its credit-scoring model. It seems logical, right? Your employment history, income and job title don't necessarily indicate what type of credit risk you are, so why should they matter to FICO?
You could be unemployed for years and continue to maintain great credit scores by always paying your bills on time.
On the other hand, you could have a high-paying job and be fabulously wealthy but have horrible credit due to missed payments and high amounts of credit card debt. The point is FICO scores analyze your credit history, as found in your credit reports, and then attempt to measure how likely you are to pay back money that has been loaned to you. While a healthy income and stable job could certainly help you pay back your debts on time, the FICO credit-scoring model relies instead on your past payment history and other leading indicators (credit utilization, length of credit history, new credit, etc.) to predict future credit risk.
Credit Myth: A Steady Job Improves FICO Scores
So why is it that so many consumers still think a steady job will improve their FICO scores? I've heard this several times recently in conversations with friends, and I've even received emails from people who are genuinely concerned about their credit scores tanking simply because they lost their job. Unfortunately, this appears to be just another one of those "credit myths" that we can't seem to kill off no matter how hard we try. I think the confusion stems from the fact that a loss of employment will most certainly hurt your ability to get approved for a loan, including credit cards.
Most lenders will of course want to look closely at your employment history, current job, and income before making a decision to offer credit of any kind. You could have FICO scores of 850 across the board, but you're obviously not going to get a home loan without a good job and sufficient income to support your loan payments. In addition, credit card companies seem to be asking for more employment and personal income information on credit card applications these days.
If you list that you're unemployed on a credit card application, you can count on an immediate rejection. As you might imagine, being unemployed means you present a higher risk of running up a balance on your new card and then defaulting, regardless of how good your credit scores are. That said, the loss of a job itself will have zero impact on your FICO scores until you start carrying higher balances, missing payments and defaulting on loans. That's when the real damage is done.
But for those of you who have carefully planned ahead and built a 6-12 month emergency fund to cover expenses during a period of unemployment, you can rest assured your job loss will have no impact whatsoever on your FICO scores as long as you continue to make payments on time.
