Unemployed but want a better credit score? Try these 4 proven strategies

In India, boosting your credit profile or enhancing your credit score during periods of unemployment is quite challenging but it is still achievable.

A strong credit score is crucial for future financial opportunities, including but not limited to securing flexible personal loans and premium credit cards.

Smart ways to improve your credit score during unemployment

Your credit score is nothing but the report card of your financial repayment history. This score is important because it helps lenders in deciding whether it is prudent to lend you money or not.

Akshay Aedula, Product and Growth, CRED says, “Improving your credit score while unemployed is possible but requires a more intentional approach. While income plays a role, it isn’t the only factor. Timely repayments matter most. Using your savings, benefits, or any alternate income to pay on time consistently can help preserve your credit score.”

“Credit utilisation is equally important. Keeping your credit card balances below 30% of your total limit shows responsible usage and can positively influence your score. Avoid taking on new debt through loans or additional credit cards, as it increases repayment pressure and can signal risk to lenders. If you need liquidity, consider smarter options like a loan against mutual funds (LAMF), which gives you access to funds without disturbing your long-term investments.”

He further added that, “Errors in your credit report can also pull your score down. Reviewing your report regularly and disputing any inaccuracies is a simple, effective way to improve it. Even without a regular income, staying on top of these factors can help you maintain and even improve your credit health.”

Keeping the above factors in mind, here are four actionable strategies that can be deployed by you to boost your credit score even without a steady income:

1. Review and rectify your credit report

Start by obtaining your credit report from prominent bureaus such as CIBIL, Experian, CRIF High Mark among others. Carefully scrutinise the report for problems and inaccuracies such as improper personal details or erroneous account information. Raising a dispute against such problems and rectifying them can positively influence your credit score.

2. Ensure on time payments

You should make sure that your payment history remains clean. It is this history that influences your credit score. Now, even during unemployment induced financial difficulties, you should strive to make at least the minimum payments on existing debts, including personal loan EMIs and credit card bills. Regular on time payments demonstrate financial integrity and responsibility to lenders.

3. Manage credit utilisation

You should keep your focus on ensuring that your credit utilisation ratio i.e., the percentage of your credit limit you are using stays below 30%. High credit utilisation can signal financial difficulty and distress to lenders. If possible try to reduce outstanding balances and avoid maxing out credit limits.

4. Limit new credit applications

Each and every new credit application such as a new personal loan request or a credit card application can lead to a hard inquiry on your credit report. This has the potential to lower your credit score. Now during unemployment it is always prudent to avoid applying for new credit lines until and unless it is absolutely necessary.

Additional considerations:

• Alternative Income Sources: If during your unemployment period, you have other significant sources of income such as rental income, dividend yield from stocks or other income streams then you should ensure that you keep them well documented. Some financial institutions might consider these while assessing creditworthiness.
• Explore alternative employment: In case securing a job opportunity in the mainstream is getting difficult, still to keep your credit score safe and improving you can seek alternative employment opportunities. Some examples of alternative employment avenues are selling handmade goods, reselling products online, part time jobs in retail, hospitality, customer service etc. Such focus will ensure that you are able regain your consistent flow of income thus boosting your credit score.

Therefore, you can improve your credit score even while staying out of a job. This can be done by building knowledge, staying positive along with focusing on retaining your earning potential to boost your overall credit profile.

Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.