How to Rebuild Your Credit After Long-Term Unemployment

A couple looks at their rising credit scores.

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A lapse in employment can take a toll on your credit. You can do all you can to preserve your credit score, but during a long period of unemployment, you may have to make some difficult spending decisions that result in credit score damage. Once you’re back on the clock bringing in steady pay, you can begin rebuilding your credit score.

Get an Idea of Your New Income

Knowing your updated monthly income will give you some idea about the lifestyle you can afford and what you can afford to put towards getting your credit back on track. Keep in mind that you’ll have taxes or other benefits deducted from your paycheck, so your actual take-home pay might be 30-40% less than what you’re expecting. Your first paycheck will give you a true idea of what you’re going to make each month.

Update Your Budget

Now that you have regular income again, update your budget to plan your current income and expenses. At the end of the budgeting process, calculate how much money you’ll have left over after paying bills and other expenses. This is the amount you can put toward catching up on bills.


Include only your monthly minimum debt payments in your budget to start. You can decide to pay more if there's extra money leftover.

Avoid Credit Cards Temporarily

With a loss of income, you may have relied on your credit cards to cover bills and expenses. Now that you’re working again, it's important to switch from your credit cards to your paychecks to cover expenses.

Breaking your credit card dependency may be hard, but it’s a necessary step toward rebuilding your credit. Tricks like freezing your credit card or removing it from one-click shopping websites can prevent you from making impulse purchases.

Take Inventory of Your Debts

Make a list of all your credit cards, loans, and other debts, noting the account status of each. For debts that are past due, list the amount of the delinquency and the number of months past due or the collection or charge-off status. This information will allow you to prioritize your accounts.


A recent copy of your credit report can help you figure out where you stand with your debts. Every year, you are eligible to get a free copy of your credit report from each of the three credit reporting companies. Every week through April 20, 2022, you can get a free copy of your major bureau credit reports through

Get Caught Up

Figuring out which order to catch up on your bills is a tough choice, especially if you’re behind on several monthly payments. Forbearance or other hardship options may be ending soon, so it's key to get ahead of your payments before that happens.

Mortgage and Auto Loan

Your mortgage and car loan should take priority over your credit cards. You don’t want your home foreclosed or your vehicle repossessed. If either process has already started, contact your lender to figure out what you need to do to get caught up. You may be able to spread the past due balance over several months until you’re all caught up again.

Credit Cards

Next focus on credit cards, particularly any that are closed to being charged-off, e.g. approaching 180 days or six months past due. Catching up on those payments allows you to keep the account from being charged-off or being sent to collections. Contact your credit card issuer to find out if there are any hardship options available to you.

Utility Payments

Utility payments, cable and internet, and cell phone typically don’t affect your credit as long as your payments are made on time. However, if these payments become severely past due, to the point that your services are disconnected, your credit is at risk. Cancel the services you no longer need if you can no longer afford the monthly payments to protect your credit.


Consider contacting a consumer credit counseling agency who can work out a debt management plan with your credit cards and loan accounts. You’ll pay one lump-sum payment to the credit counseling agency, and they will, in turn, pay all your accounts.

Cleaning Up Your Credit

Late payments may have caused your credit score to drop, but there are a few tactics that may help you remove negative credit report information. Keep in mind that if you were late, the credit bureaus could legally report this payment status for the duration of the credit reporting time limit, which is seven years for most types of accounts.

If high credit card balances are hurting your credit score, the remedy is to pay these balances down. You probably won’t be able to do it all at once, so take it month by month, paying as much as you can toward one credit card until you’ve paid off that balance, then moving on to the next credit card. Start by paying the minimum required amount for each credit card. Allocate any remaining money you still have to the credit card with the highest interest rate until it is completely paid off. Then do the same for the card with the second-highest interest rate, and so on and so forth until all are paid off.

Get Positive Information

Taking care of the negatives will help your credit score. But, you'll also need positive credit information to help improve your credit score. If you still have open accounts, making timely payments on them each month will help improve your credit score. But, if all your accounts have been closed, you'll need new ones to rebuild your damaged credit completely.

Focus first on taking care of your past due bills. Then, once you're caught up, consider getting a new credit card. Secured credit cards and other credit cards for people with bad credit are good prospects. Remember, once you get started with credit again, to handle your credit cards responsibly, charging only what you can afford and paying on time every month.

With discipline and a solid plan, you can successfully rebuild your credit score. Just be patient with the process and diligent about managing your credit going forward.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. TransUnion. "Get Your Free Credit Report."

  2. Experian. "What Is a Charge-Off?"

  3. Experian. "How Long Does It Take for Information to Come Off Your Credit Reports?"

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