Applying for a new job means perfecting your resume, writing a cover letter, and preparing for an interview. But there’s something else you should work on before submitting your next job application: your credit.
According to a recent HR.com report sponsored by the National Association of Background Screeners (NABS), 95% of companies conduct some type of background check on potential employees — 16% pull credit or financial checks on all job candidates and almost one-third do credit checks on some candidates.
If Laura could do it all over again, she wouldn’t have left her good paying customer service job for another one because now she’s out of work. Why? All because she says her new employer fired her over a credit check weeks after she’d started her new position.
Laura was hired by a company in Alpharetta, Ga which is a suburb about 20 minutes north of Atlanta. She had gotten the job through a placement agency. Laura says she had a driving conviction in her background that she fully disclosed to the agency and says she went through about six interviews before being placed in the new job. However, a few days after being hired she says she was asked to sign a document permitting her new employer to do a background and credit check. When the report came back she says she was fired because of her past credit problems!
“Who hasn’t got credit issues in this economy?” she asks. “It’s so unfair and I left a good-paying job and now can’t go back. No one told me my credit would have anything to do with my job!”
Why would a potential employer look at your credit?
More than half of employers conduct background checks during the hiring process only, and the No. 1 reason (at 86%) is to protect their employees and customers, says the HR.com report.
For security purposes, the credit report can be used to verify someone’s identity, background, and education, to prevent theft or embezzlement, and to see the candidate’s previous employers (especially if there is missing employment experience on a resume). For employers, it is a big picture snapshot of how a potential candidate handles their responsibilities.
Laura says her new job was servicing contracts for medical equipment. She wasn’t handling money and can’t understand what her credit had to do with her work.
Unfortunately, under the Fair Credit Reporting Act, a prospective employer must get your signed permission to conduct a credit check. However, if an adverse action is taken, the company must provide the reasons why and provide you with a copy of the report and a disclosure of your rights under the Fair Credit Reporting Act. Laura says they got her permission to pull the report but did not provide her with any other information.
If you’ve been plagued with credit issues in the past, this same nightmare could happen to you!
In this economy, credit issues are top of mind with many workers. Due to job loss, increasing unemployment, and other financial hardships, increasing numbers of people find themselves facing credit challenges.
“Credit reports indicate whether or not you’re responsible,” financial expert John Ulzheimer, formerly of FICO and Equifax stated. “And, they also indicate if you’re in financial distress. These are attributes that are important to employers. For example, would you want to hire someone in your accounting department who can’t manage their own obligations?”
Normally credit checks are used as a prescreening tool for employment, but a growing number of companies will conduct random credit checks along with criminal background checks and drug screenings as a way to routinely give them a reason to dismiss someone. And because of the paperwork they make you sign as a condition of employment, there’s little if anything you can do about it if you intend to stay employed there.
Even if employers don’t see your credit score in a credit check, they will definitely see your open lines of credit (such as mortgages), outstanding balances, auto or student loans, foreclosures, late or missed payments, any bankruptcies, and collection accounts.
How can you prepare for a credit check by a potential employer?
Since employers are mainly checking to see any patterns or habits of mismanaging money when they conduct a credit check, the best way to prepare is to know what your credit report says before applying to any job (no matter the position). And work on fixing your credit issues beforehand.
You certainly don’t want to be surprised when you go apply for a job to learn something negative is on your credit reports. Just like you would check to make sure your credit is in good standing before you go purchase a home or a car, I always advise people who are job hunting to get a good idea of what your credit reports look like well in advance. And, be able to explain any negative entries. It could save your job the next time your company decides to start implementing credit checks as a condition of employment.