If you know about your credit report, you undoubtedly know that a poor one can keep you from getting new credit or cause you to pay more in interest charges. But did you know that a poor credit report could keep you from getting a job or even keep you unemployed?
Credit and the hiring decision
I have seen where people with great resumes were turned down for jobs and couldn’t understand why. I read one example where a very well qualified guy applied for for a job at a high-end men’s clothing store but didn’t get it. He eventually received a letter from the store explaining that it had run a credit check on him and had found information that played a role in its hiring decision.
Check that little box?
What this gentleman was doing every time he applied for a job was checking that little box that grants the potential employer the right to check his credit report. As a result, he kept getting turned down for jobs he was well qualified for.
Why credit reports?
Many employers now routinely check credit reports. Why is this? It’s because as the credit-reporting bureau Experian explains, “Credit information provides insight into an applicant’s integrity and responsibility toward his or her financial obligations.” You might disagree with this but if a prospective employer accepts this as a fact and you have a bad credit record, you could be in a world of trouble trying to get a new job.
The Catch-22
About 47% of employers use credit checks when making a hiring decision meaning that this could easily turn into a Catch-22. You lose your job, you get into financial trouble that appears on your credit report and this keeps you from getting a new job.
No room for explanations
One of the biggest problems with credit reports is that they leave no room for explanations. Your report might show you defaulted on a loan but it won’t show why. You could have a perfectly good reason for having defaulted but you might never have the opportunity to explain it.
Be proactive
If you’re job hunting you definitely should get your credit reports. You can get all three simultaneously on the website, www.annualcreditreport.com. When you review them and see you have a black mark (or marks) that could keep you from getting a job, be proactive. Discuss the issue upfront during your job interview – especially if you can explain what caused the problem and what you tried to do to solve it. Many prospective employers will appreciate your candor and might overlook that black mark.
Credit reports and credit scores
Credit reports and especially credit scores have seeped into our lives in many ways you wouldn’t expect. Some automobile insurance companies now routinely pull credit scores when calculating premiums. If you try to rent an apartment, the odds are good that the landlord will request your credit score. And, of course, mortgage and auto loan companies will use your credit score when deciding whether or not to loan you money and at what interest rate.
Get your credit score
You should also know your credit score. The website www.myfico.com will sell you it for $19.95 or give it to you free if you sign up for a free trial of its Score Watch program. You should also be able to get your score free from one of the three credit-reporting bureaus though you will likely have to sign up for something to get it.
If you have a poor score
If you have a poor or bad credit score (500 or below) there isn’t much you can do about it short term – unless you find errors that are affecting it negatively. If so, you could write a letter to the appropriate bureau and ask that the item (or items) be deleted from your report. You will need documentation to prove your case. But if you do, it’s likely that the negative items will be deleted and your credit score should go up noticeably.