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Most of us realize that our personal credit record affects our ability to secure loans or open credit card accounts, but few realize that a bad credit score can affect their job prospects – even bad credit from college. The Society for Human Resource Management released a survey in 2010 that showed 13% of the businesses they interviewed used a credit check to assist in assessing potential employees for a variety of positions. The percentage was even higher in the corporate sector, where large human resources departments and standardized procedures are used to screen candidates. It is quite possible that a bad credit score could affect your after-college aspirations.
Though a credit check is just one tool used in the pre-screening process by employers, evidence showing that you may not be able to manage your financial obligations could be viewed as a sign of irresponsibility or undependability. Employers may view a candidate with a heavy debt load as someone who may be distracted from their job performance and unable to efficiently apply the energy required to perform their duties. This is especially true of jobs in the financial sector, security, and other positions where financial maturity and dependability are required.
The same is true if you’re applying for a position in which you’ll have access to trade secrets, be handling large amounts of cash or merchandise, or are a key holder. Nine times out of ten you can expect a credit check in such situations, but the practice is by no means limited to just those areas. Additionally, if your job requires security clearance or access to cash and valuables, you will most likely be subject to continued background checks over the course of your employment.
Is This Practice Legal?
There are critics of the practice who insist that a person’s credit history is irrelevant to their ability to perform a particular job, but the practice is legal in most states, though the employer must get your permission to do so. Unless the company you plan to work for is located in one of the states that curb the extent of such credit checks, namely; Connecticut, California, Maryland, Hawaii, Illinois, Vermont, Oregon, or Washington, the only recourse you have is to refuse permission. This could place a dark cloud over the proceedings however, giving the employer the impression that you have something to hide.
Keep in mind however that most employers will only check a person’s credit history when there is a business reason for doing so – for example, you’ll have a corporate credit card, you’ll be handling cash, or you’ll be privy to corporate secrets. Also, by the time the hiring process gets to the point of a credit check, the employer is interested in you. They genuinely hope everything checks out, be it your academic history, past work performance, or your credit or criminal history. The best way to handle a potential background or credit check is to be prepared for it.
Get Your Affairs in Order
Before an employer can check your credit history, they must have a signed release from you. If you have your affairs in order however, that should be no problem. Knowing how to prepare for a credit check involves knowing what it will reveal to potential employers. Employers will receive the same type of credit report that a lender will get, though some credit bureaus will remove information that is irrelevant to job applications such as race, age, or marital status. What they will see is if you have any delinquent payments, have declared bankruptcy, legal settlements, and a full listing of your debts such as credit card accounts and personal loans.
Before you begin your job search it is advisable to get a copy of your personal credit report from each of the three major credit reporting bureaus; TransUnion, Equifax and Experian. You can do so for free once a year, and it is recommended you get a copy from each as they may all have different information about you. After receiving your report you can look for mistakes or inaccuracies that won’t blindside you during an interview
If you find any errors in your report such as a debt listed as unpaid that has been settled, you need to contact the creditor to have them remove it from your credit history by informing the credit bureaus. If you have negative information such as old unpaid credit card debt, avoid using a credit repair agency to try to correct it. Rather be up front and honest about it if an employer asks you, and ensure them that you’ve since developed more responsible financial habits.
About the Guest Blogger: Ethel Wilson has been advising clients on how to improve their credit score ratings for over 12 years. With an extensive background in the banking, credit scores and financial industry, she now shares the best of her credit score information as a contributor and editor of CreditScoreResource.com.