Why employers run credit checks
You might think that your credit score has nothing to do with your job performance, but many employers would beg to differ. Nearly 60 percent of United States employers run credit checks on potential employees, looking for information like previous addresses and former employers as well as information on spouses and demographics.
So why would a potential employer check your credit? Simply put, to see if your financial records jive with the details you provide in your resume and interview. Many companies see a credit check as another reference for a job search candidate. A candidate’s personal references can be unreliable, so looking at credit reports helps companies verify several significant details about your personal life, including previous salary amounts and whether you’ve been financially stable over the last few years. If you say that you made a six-figure salary, but your credit check reveals that you’ve had money problems, that scenario could send up a red flag to your potential employers.
Some companies also try to correlate your bad credit to your state of mind. If a credit check reveals that you have major debt obligations, an employer might assume that your bad credit is a distraction that could keep you from doing your best at work. In a competitive job market, this sort of detail might take you out of the running for a job that you’re qualified for if you’re up against another candidate who has the same qualifications and a better credit score.
Industries that look at credit scores
While any employer could check your credit, your credit score is more likely to affect your job search if you work in one of a few specific industries and sectors. Employers in the financial services industry as well as government employers routinely screen applicants for bad credit. Even outside of the banking industry, any job that requires an employee to manage money often involves a credit check during the interview phase. If there’s potential to embezzle funds, employers want to know that candidates can handle money responsibly and make ethical choices.
Handling bad credit during your job search
You might think it’s unfair that an employer can count your poor credit against you, but it’s not illegal. If a company runs a credit check on you, you have a right to request a copy under the Fair Credit Reporting Act. If it turns out that you’re denied a job because of bad credit, the law requires the company to disclose their reasons to you.
If your credit score is less than perfect, there are three things you can do to be prepared during your job search:
First, anticipate scrutiny. Before you start your job search, request a free copy of your credit score and look it over to ensure all details are accurate. Take steps to fix any errors. Even a small error can make a perfect credit score plunge.
During the course of your job search, be upfront about your bad credit. If you know your potential employer is running a credit check, explain how you are being proactive about resolving your issues. It’s best to tell your story in person, rather than letting the credit report tell the story — especially if you have bad credit because of a situation that’s beyond your control (like divorce, medical problems, or identity theft).
Finally, don’t be too hard on yourself for having poor credit. Bad credit may draw out your job search, but know that employers have an obligation to find the best and most qualified candidates. If you’re really the right person for a job, you’ll likely get it.
It’s a long road to repairing poor credit, but with education and perseverance you can see those important financial numbers climb back up.
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