Getting a job is more than sending in your résumé, sitting through multiple interviews, and providing great references. Employers want to ensure they make the best hiring decisions, so they've turned to a surprising tool to help them hire smart: your credit report.
That’s right. Many employers will look at your report (not your actual credit score) to give them an idea of what kind of employee you’ll be. This might be puzzling to you. After all, how does your credit report tell them what kind of teacher, salesperson, engineer, or food server you are?
An employer can use your credit report to learn more about you than an interview or résumé will ever tell them, like how responsible, trustworthy, and honest you are. A credit report can also help them choose between two equally qualified candidates.
What Employers Look For on a Credit Report
An employer who pulls your credit report may be looking for these things on your credit report and make certain assumptions about how they would affect your job performance:
- Liens - Tax liens or liens on your property could indicate you're irresponsible.
- High credit utilization - If you're maxed out on your credit cards, it could indicate you're over your head financially and can’t stick to a budget.
- Bankruptcies or foreclosures - Either of these could suggest that you have trouble keeping your commitments and can’t think long-term.
- Delinquencies - You’re stressed about money and won't be able to focus on your job.
- Lots of account activity - Opening additional lines of credit in a short period of time could mean you're desperate.
A prospective employer might also use your report to confirm the information presented in your résumé. For instance, if you state on your résumé that you were gainfully employed and making a good salary yet your report shows you had lots of credit problems during that same time, that could raise suspicions you weren't as forthcoming about your salary.
Federal law allows employers to look at a modified version of your credit report (no account numbers, birth year, or references to your spouse). However, they must get written permission from you beforehand. Fortunately, these employer searches do not show up on your report so other employers or lenders won’t see the activity. And if your report prevents you from getting a job, the employer must let you know and provide you with a copy of the report. Employers in some states cannot pull credit reports or have restrictions on how they can use credit information. If your state allows employers to run a credit check on job applicants, it must follow rules set out by the Fair Credit Reporting Act (FCRA), which are detailed here.
Bad Credit? Here's What You Should Do.
If a prospective employer requires a credit pull before they'll make you an offer, be proactive if you feel your credit report is going to give them an unexpected and nasty surprise. Let them know why you have negative information on your credit report and tell them how you’re trying to meet your obligations, especially if it’s due to a health issue, divorce, unemployment, or other major life change, something many employers can sympathize with. Your transparency could help your chances of getting hired.
Better yet, work at fixing the report before you start your job search. Make a habit of getting a copy of your free yearly report at annualcreditreport.com. Check it carefully for errors and if you find any, call the credit bureaus to get them corrected. In fact, it's a great idea to check your credit report even if you know your credit history is admirable. There could be a mistake on there that costs you a great job.
Just remember: a single late payment might be the deciding factor in whether you versus someone else gets the job. If you’re considering a job switch, be meticulous with your loan payments and spend responsibly.
Did you know Hanscom FCU offers free credit report and score reviews for members? If you're about to start looking for a job, make sure your credit report is in tip-top shape before you zap off a resume. We have credit experts who can meet with you virtually to discuss how to improve your score, remove incorrect information from your report, and even help you spot fraud. Learn more here.
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