I've Lost My Job. Will It Impact My Credit Score?

Losing a job can be a major blow -- not just financially, but also emotionally. For many people, losing a job is like losing a bit of themselves and their identity. And from a financial angle, not having a paycheck coming in can be extremely stressful.

If you've recently lost a job, you may be wondering how that might impact your credit score. The good news is that your employment status is not a factor in calculating your credit score. Neither is your income. But the loss of your job and income might impact your credit score indirectly.

When you're unable to pay your bills

There are five different factors that go into calculating a FICO® Score, which is the most commonly used credit scoring model in the U.S.:

• Payment history, which makes up 35%
• Credit utilization, which makes up 30%
• Length of credit history, which makes up 15%
• New credit accounts, which make up 10%
• Credit mix, which makes up 10%

As you can see, none of the above factors directly relate to being employed or having a certain income. So it's more than possible to lose a job without seeing your credit score drop in the weeks or months that follow.

That said, when you lose a job and the paycheck you've long relied on, paying bills becomes more difficult. If you fall behind on your bills and stop paying them on time, that could impact your payment history for the worse. Since that factor carries more weight than any other in your credit score calculation, late payments could cause that number to take a dive.

Similarly, your credit utilization speaks to how much of your available credit you're using at once. The higher your credit card balances, the more negatively it's apt to impact your credit score. But if you're out of work and without a paycheck, you may be forced to run up higher credit card bills until you're employed again. So that's another way the loss of your job could indirectly affect your credit score.

Always have savings on hand

It's not always easy to predict when you're about to get laid off. But one thing you should try your best to do is have a fully loaded emergency fund at all times.

If you maintain a savings account balance that can cover three months or more of essential bills, you'll be less likely to wind up being late with payments or having to charge expenses on credit cards during a period of unemployment. And that could be your ticket to protecting your credit score in that situation.

RELATED: Emergency Fund Calculator

The loss of a job won't immediately send your credit score plummeting, so if you're out of work, that may be one less thing to worry about initially. But it's important to understand how credit scores are calculated so you know whether your actions might cause yours to drop. And it's definitely important to arm yourself with emergency savings in case you're unable to collect a paycheck for a period of time through no fault of your own.