Why Employers Check Your Credit Report

Getting a job these days is tough. It’s a very competitive marketplace and jobs don’t seem to be growing on trees. Obviously, you have to do everything you can to make yourself stand out.

In addition to a great resume with lots of pertinent experience, you should also have a nice, clean credit report.

That’s right. Many employers are looking at your report (not your actual credit score) to give them an idea of what kind of employee you’ll be. Sounds kind of odd, doesn’t it. After all, how does your credit report affect what kind of teacher, sales person, engineer or waitress you’ll be?

Employers use your credit report to determine all kinds of things about you, like how responsible, trustworthy and honest you are. But a lot of the time, a credit report will just help them pick between two equally qualified candidates.

So what exactly are they looking for?

-    Liens - which might indicate that you’re irresponsible.

 -    100% credit utilization (you’re maxed out on your credit cards) - maybe you’re in over your head and can’t stick to a budget.

-    Bankruptcy or foreclosure - could suggest that you have trouble keeping your commitments and can’t think longterm.

-    Recent late fees - you’re stressed and have trouble budgeting.

-    Lots of activity - if you’re opening accounts, they might think you’re desperate and need extra credit. If you’re closing a lot of accounts, it could mean you aren’t good with money.

They also might use your report to confirm the information presented in your resume. For instance, if you state on your resume 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 a red flag.

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 before hand. 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.

What should you do if you have a bad credit report?

If they ask to see your report, be proactive and explain the situation and how you’re trying to meet your obligations (especially if it’s due to a health issue, divorce, etc…) This might help your chances of getting hired.

Better yet, work at fixing the report before you start your job hunt. Make a habit of getting a copy of your free yearly report at annualcreditreport.com. Then check it carefully for errors and if you find any, call the credit bureaus to get them corrected.

Just remember: a single late payment might be the deciding factor in whether you or someone else gets a job. If you’re considering a job switch, be sure to stay current with your loan payments and spend responsibly.

NOTE: In some states, it’s no longer legal for employers to pull your credit report (it’s still ok in Massachusetts).

Your Credit Report  

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Josh Paul

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