Applying For Credit When Changing Your Career

Changing careers can make getting approved for credit more difficult. Be prepared!

Borrowers who are transitioning careers may find that it’s more difficult to get credit unless they plan for the “in-between” phase. That phase can take the form of moving from college to a new career, making the switch between military and civilian life, or even retiring from the workforce altogether. What does it take to be prepared?


Time your credit application to avoid problems caused by a lack of income

The first thing to do is to anticipate a potential lack of income. For example, when you apply for major lines of credit such as a mortgage loan, the lender must determine the applicants risk of not paying back. A potential borrower with no income is obviously a higher risk and would have a higher chance to be turned down. Therefore, the timing of an application is critical.


For example, if you plan to retire at a certain age, it may be worthwhile to consider timing your credit application. It may be best to plan for either a few years prior to your retirement date, or after your benefits and retirement pay have started rolling in. Obviously, some credit cards, or other smaller accounts don’t require several years’ worth of planning. Planning would more than likely be needed for loans such as a mortgage, refinance loan, or auto loan.


Those transitioning out of military service and into civilian life should consider doing the same thing. A major line of credit applied for in the middle of your transition might get turned down, but one applied for soon after taking military retirement pay or starting your next phase of employment has a much better chance.


Saving money can save your credit application!

Budgeting can also help. Mortgage lenders often consider “substantial cash reserves” as a “compensating factor” if other parts of a mortgage loan application seem marginal or close to the limits of what can be approved. Depending on the lender, these issues may be handled on a case-by-case basis. Due to this, it’s good not to assume you can’t get a loan or a credit card simply based on recent changes in your employment.


A good employment history can keep your credit application strong

You may find that the nature of your work, the direction your career is headed, or the type of training you have received could in some cases make a difference. In others, you could simply be required to show proof of employment at a new job and explain why you moved on. The length of employment at your new company may not be as much of a factor as your overall employment history, and that’s an important factor to remember.


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