Trying to land your dream job can bring the stoutest of job searchers to their knees. You spend countless hours perfecting the cover letter and résumé you send to prospective employers. You prepare for interviews as if you are auditioning for a role in an Oscar-nominated film. Between wearing proper attire and presenting the right non-verbal communication cues, it appears you have mastered the fine art of landing your dream job.
That is, of course, until your poor history becomes a career nightmare.
Most of us acknowledge that bad credit negatively influences our ability to secure open lines of credit as well as car and home loans. Many things such as a repossession on a credit report can push your stellar professional résumé to the back of the employment line.
A Common Myth Debunked
Although a growing number of employers refer to reports to make hiring decisions, employers do not access your FICO score. In an article published in US News & World Report, Tom Quinn, Vice President for Fair Isaac Corporation, says: "In reality, reports pulled for employment screening purposes are not supposed to have any score appended. So the employer should have no awareness of your FICO Score.” However, employers review reports not for the score but for red flags that include bankruptcies and legal judgments against you.
Why Bad Credit Hurts Your Employment Opportunities
A growing number of employers have turned to credit histories for making decisions on job applicants. This is an especially strong trend for employers that sell high-end products, such as jewelry and cars. The reasoning for the surge in inquiries on job applicants stems from the philosophy that if you cannot manage your personal financial obligations, how can an employer expect you to manage your professional financial obligations? If your monthly debt payments exceed your salary, most employers believe your stressful financial situation can lead to major on-the-job distractions. Employers also fear poor credit might prompt employees to embezzle company funds.
It Starts with a Background Check
Far too many job applicants view background checks as standard searches into criminal activity. We erroneously believe that because we have a clean criminal record, employers place our background checks into the "Acceptable" file. However, employers also run background checks to discern the state of our finances. How can a bank hire a job applicant that has several financial judgments pending in the judicial system? If one of the roles of a job you seek involves handling company finances, a poor history that shows up in a background check derails an attempt to secure employment.
Repossession on a Credit Report is a Career Killer
It is one thing to have late credit card payments appear on a report but quite another thing to have a car or home repossession judgment staring you in the face. Not all woes are the same, as many employers look past credit card issues in search of severe financial distress, such as a home foreclosure or a vehicle taken back by a lender. Remember this mantra: the larger the issue, the more likely you can expect future employment issues.
Forget about Promotions
Bad credit does much more damage to your career than preventing you from seeking your dream job. You can work for the same company for years and then, one day, your name comes up for promotion discussion. A growing number of companies run checks on employees that want to move up the organizational employment chart. You can establish a pristine history for 20 years and experience a roadblock to your career, if you suffer a major financial loss during the 21st year of employment with the same company. All of the professional awards and accolades mean nothing in consideration of a promotion whenever your report includes a major financial hit.
How to Prevent Bad Credit from Impacting Your Career
According to a survey conducted by Visa, 60% of Americans incorrectly believe that employment history is factored into determining scores and that it plays an important role in screening job applicants. Federal law mandates that employers must inform job applicants of the intent to perform checks. Before you sign a job application, make sure to read the fine print to see if the prospective employer performs checks. Moreover, learn how deep into your credit past a prospective employer digs. Some checks only involve basic probes that verify the existence of bank accounts.
If bad credit is preventing you from climbing the career ladder, you can take several measures to enhance your financial situation in the eyes of prospective employers. Here’s how:
1. Examine Your Credit Report
They say time heals all wounds and with your history; “time” means seven years. Federal law allows you to receive one free copy of your report every 12 months. You should request a free report from the three major reporting agencies (Equifax, Experian, and TransUnion). Make sure all of the information presented in your report is accurate – even personal information such as your address and social security number. If any of your financial information is not accurate, you have the right to challenge the inaccurate data by filing a formal request with the reporting agencies.
2. Verify Employer Credit Check Policy
Employers typically do not tip their hands concerning background checks until they want to extend offers to job applicants. This means job applicants should never volunteer information that pertains to personal finances. If you receive a job offer on the contingency of a background check, ask the employer about the organization's handling of background checks. Some employers search only for criminal records, while others perform comprehensive background checks that include examining your credit history. Most employers have no problem explaining the background check process.
3. Be Proactive
The worst strategy a job candidate can use is to hope for the best, but expect the worst. If an employer asks permission to conduct a background check that includes a look into your history, you need to address any issues on your report before the employer uncovers them. Explain to the employer what they can expect to find on your report. Many employers appreciate the candor, especially when job candidates provide rational reasons for the financial bump in the road. Do not make excuses for blemishes on your report but, instead, offer sound reasons such as an employment layoff or an unexpected substantial financial hit. Moreover, if you have contested a record on your report, explain to the employer how you are handling the issue.
Bad credit presents the ultimate Catch-22 for job candidates. Delinquent accounts mean you need the money to whittle down the debt. However, you cannot earn money if employers refuse to hire you because of your shoddy history. Preparing for a job interview now involves addressing issues long before you shake an interviewer's hand. You must learn what is on your report and challenge any incorrect information. Verify an employer's background check policy, as well as inform employers about what they can expect to find on your report.
Many employers use LexisNexis or Sterling Talent Solutions to conduct background checks. Spend some time reviewing the information posted on both websites to educate yourself about the background screening process. You should also consider working with a credit repair specialist to minimize the damage caused by the poor financial decisions you made years ago.
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