Most people associate credit scores with loans, credit card applications, and the like. A good score makes it much easier to secure financial products, helping you get the best terms and rates to fund future purchases. But banks and lenders aren’t the only ones who might check your credit – prospective employers might look at your credit report too!
Indeed, many companies include credit report checks as part of their hiring process. As well as worrying about polishing up your resume with resume cover letter writing services, you also need to consider your credit situation when applying for a new job. This guide will explore when, how, and why employers check credit, and what you can do about it.
Understanding Credit Scores vs. Credit Reports
First of all, it’s important to note that employers aren’t actually able to view your credit score. If they want to learn more about your financial situation, they may be able to pull up a version of your credit report. If you’re not familiar with these terms, you may wonder what the difference is.
What Is A Credit Score:
Well, your credit score is that all-important three-digit number that’s based on a range of factors to effectively sum up and grade your credit situation. A good score can help you get approved for loans and other products more easily, while a poor score often makes it much harder to get the likes of home and auto loans.
What Is A Credit Report:
Your credit report is different. It’s a detailed breakdown of your credit history. That includes details of any existing credit accounts and available credit you have, your payment history, employment history, and so on. Your report will also show if you have any history of bankruptcies, but won’t show your score, income, or unrelated personal details, like marital status and political affiliation.
How Common Is It for Employers to Check Credit Scores?
A credit check is just one of the various background checks that employers may carry out on prospective hires. Almost all employers perform some sort of background check, and over 50% of them now do credit checks. When applying for a job, there’s around a one in two chance that the employer in question will want to see your credit score.
How Is the Credit Check Carried Out?
It’s natural to feel a little concerned or cautious about the concept of an employer checking your credit. Even if you’ve got a good score and problem-free credit past, you may worry about how the check is conducted and whether or not the employer will even ask for consent before digging into your financial history.
Thanks to the Fair Credit Reporting Act (FCRA), employers must ask for written consent before carrying out a credit check. They won’t be allowed to see your report without that consent. Employers also must let you know if they may reject your application based either in part or entirely on your credit report.
State Laws Against Checking Your Credit Score:
What’s more, it’s worth noting that some states, including California, Illinois, and Nevada, as well as localities, like New York City, have laws against credit checks for prospective employees. If you happen to live in one of these areas – or you’re applying for a job there – then there’s no risk of credit being checked at all.
Why Do Employers Want to See My Credit Score?
We’ve covered the “What” and the “How” of employment credit checks. Now, let’s address the “Why.” Naturally, you may be wondering why your credit history would be of any interest to an employer, or what impact it could possibly have on their hiring decisions. This is an area that tends to cause a lot of debate among employers and employees.
There have even been studies into the subject of why some employers choose to carry out credit checks, and different employers will give different reasons. For some, it’s simply part of the background check process to confirm your identity. For others, it goes a little deeper than that, with your credit report being used to discover more about your character.
Credit Score Equals A Reliable Employee
For example, some employers like to look at an applicant’s credit history to see how reliable (or unreliable) they appear. Someone with a lot of late payments or even a history of bankruptcy may be less trustworthy and organized, and therefore less suitable to hire. Someone in deep debt may even be considered a higher risk of workplace crime, like theft or fraud.
There may also be cases where your credit history has a direct correlation with the kind of work you’re applying for. If you’re trying to get a role in accounting or financial advice, for example, employers may argue it’s important to carry out a credit check to see if you’re truly capable of keeping your own accounts in order, let alone anyone else’s.
How to Prepare for Employer Credit Checks
You can’t magically transform your credit score overnight or rewrite your report to make it more appealing for employers. But there are some simple measures you can take to improve your report, making it less likely for employers to reject you based on what they find in it.
Check Your Report for Errors: You’re allowed to request copies of your credit report for free online. Do this on a regular basis. Read through your report to look for any errors or discrepancies. If you spot any, get them fixed.
Make Payments on Time: Keeping up with your payments (for loans, credit cards, or any other debts) is one of the best ways to maintain and improve your credit report. It also shows employers that you’re reliable and organized.
Be Prepared to Explain Your Report To The Potential Headhunter or Employer: If there are any issues or red flags on your report, don’t try to hide or ignore them. Employers will see them if they scan your report, and it’s good to have an explanation ready to go, which may help them see those negative elements in a brighter light.
Credit Reports – Just One Part of the Hiring Process
Clearly, a strong credit report can increase your chances of being hired, and it’s smart to keep up with payments and use credit carefully. However, don’t forget that this is only one part of the hiring process. Employers will also take much more into account – like your employment history and resume.
Even if you have a mixed credit history, try not to worry too much about it. Focus on restoring your credit as well as you can and strengthen your applications in other areas to impress prospective employers. Take the time to write great cover letters, for example, or work with resume rewrite service in Colorado to fine-tune your resume.
Comments