How Your Credit Can Impact Your Job Opportunities

There are a lot of factors you’ll worry about whenever you apply for a new job. Is your resume strong enough? Will the employer think you have the right experience? Are you the best applicant for the job? Does your competition have an edge over you? Did you nail the interview process? However, there is one more factor your new potential employer may consider during the hiring process, a factor which many people forget about – your credit reports.

There is no question that the use of credit for employment screening purposes ruffles a lot of feathers. In fact, it is one of the most anger-inducing uses for credit in the eyes of a lot of consumers and consumer advocates alike. Nonetheless, it is completely legal according to the Fair Credit Reporting Act (Section 604) and many employers have considered and will continue to consider credit history as part of their hiring processes.

The Rules

When it comes to employment credit checks there are a couple of facts which are important to understand. First, for an employer to check your credit you must provide them with overt written permission. And the permission must be stand alone, meaning not buried in unrelated text or disclosures. Of course, before you get too excited about this fact you should consider that if you deny permission to check your credit then an employer is just as likely to stop your application process.

Second, employers will not check your credit scores, only your credit reports and they see only a specialized type of report at that. While the terms credit reports and credit scores are often used interchangeably they are not, in fact, the same thing. The idea that employers check your credit scores is one of the most stubborn credit myths in existence. In fact, if you conduct a quick internet search you will probably find at least a dozen sources which claim that employers check your credit scores. They would all be wrong.

Even though employers may not see your credit scores, your credit reports still contain plenty of information which may be used to evaluate you as a job candidate. By accessing your credit report an employer is able to view nearly all of the information used to calculate your credit scores. The number itself is all that is missing.

Why Employers Check Credit

Have you ever wondered why employers check your credit in the first place? Employers use credit for the same reason lenders, credit card issuers, insurance companies, and a host of others use credit reports. It helps them to predict risk and to measure character.

Hiring the wrong person for the job can be a very costly mistake for an employer. In an effort to protect their company from bad hires, employers will commonly conduct extensive interviews, background checks, drug tests, and as already mentioned, credit checks.

A record of poor credit management can be a red flag to employers for a number of reasons. Credit problems may indicate to an employer that you could potentially be untrustworthy or that you might be distracted by financial issues. On the other hand, if you work hard to earn good credit then it might just give you an edge over your competition.

Check for Yourself

Even if you believe your credit is in good shape, it is still a good idea to check your reports yourself before applying for a new job. You should check all 3 of your credit reports with Equifax, TransUnion, and Experian to make sure that the information contained in each report is correct.

If you discover any errors you can dispute them with the credit reporting agencies. Additionally, if you do have credit problems then knowing exactly what is showing up on your credit reports ahead of time may help you to be better prepared with an explanation for your potential employer during the interview process. Credit problems do not automatically mean you cannot get hired and being able to clearly explain the reasons behind your credit blemishes can sometimes help.