You survived the interviews. You cleverly explained where you see yourself in five years. You managed to sparkle even after talking about your greatest weakness.
Now there is only one thing left between you and your dream job: a credit check.
But what if you have a shortage? Credit score? Will past missteps affect your career opportunities for years to come?
What does a credit check for employment show?
The good news first: employers don’t see your creditworthiness when managing your creditworthiness.
Instead, they see one modified version of your credit report. It shows your open accounts with the edited account numbers, your payment history, your outstanding balance and the amount of your open balance. You will also see all the accounts in collections as well as bankruptcies and foreclosures that still appear on your credit report.
Here’s the bad news: the things employers look for when checking your balances – mostly negative Payment history or a high Credit utilization – are the two most important factors that can affect your creditworthiness.
So if you have a low credit score, your credit report likely contains information that could be a red flag to employers.
With a company reviewing your balance for hiring purposes, you don’t have to worry about your score being impacted. The train is what is called Soft checkwhich does not affect your score. A tough test that goes into applying for credit can lower your score by a few points.
When do employers carry out credit checks?
For many applicants, a credit check is likely not a problem. ONE HR.com survey 2018 Out of more than 2,000 HR experts found that only 16% of companies subjected all employees to a credit check.
Obviously, credit checks are most common for roles that involve money or sensitive information. When your personal finances are in trouble, employers may fear that you are more likely to embezzle money or commit fraud.
However, some companies do credit checks just because they believe that if you are good at managing your own money, it is a sign that you are a good workman – although a growing number of state and local governments oppose the practice . At least 10 states, Washington, DC, as well as Chicago, New York City, and Philadelphia, limit the use of credit checks for candidates who are not involved in finances or sensitive data.
Employers usually do credit checks at the end of the hiring process. Most do them after a conditional job offer is made, although some do it after an interview.
Under the Fair Credit Reporting Act, you must provide written consent for an employer to withdraw your credit.
What to do before a hiring manager runs your credit?
If you’re an applicant and have been asked to agree to a credit check, you want to know exactly what the employer will see on your reports.
The best way to do this is to get a free credit report from all three offices at AnnualCreditReport.com. Usually you are only entitled to one free report per year from each office, but due to the pandemic, you may be eligible for one free report every weekWhile this is checked often, it is unlikely to be required. Note that your credit reports are really free here. You don’t have to revise your credit card for a temporary test to get it.
If you find inaccurate information, it is important that you deny it beforehand with the offices – and let the hiring manager know that you deny this too.
If your credit problems are due to difficulties such as a family death, layoff, or divorce, explaining the circumstances to the hiring manager but be careful when offering TMI.
However, if the report contains negative information that is accurate, the proactive approach is best. If you’ve made mistakes in the past, check with the hiring manager before they manage your balance.
You will be in a better position to represent your case if you can explain how you are working to fix problems and why your previous mishaps are not affecting your job performance.
If the employer chooses not to hire you based on the information in your credit reports, they must notify you according to the Fair Credit Report. They will also need to give you a copy of the credit report they used to make the decision, a summary of your rights, and sufficient time to dispute the decision.
While this process may seem like an upset stomach, it helps to understand the employer’s reason for checking your credit: it’s usually about risk reduction. They want to make sure they aren’t hiring someone likely to steal from the company or their customers instead of judging you for a missed credit card payment.
Why you need to check your credit reports, not just your scores
Whether or not you are in the job market, you need to regularly monitor your credit reports. And no, signing up for a credit score monitoring service is not enough.
While these services can be helpful, only the reports presented by the official bureaus will show you what is really causing credit problems.
Think of your credit score as your temperature. If you develop a fever, it could be a sign of an underlying problem. Getting your credit report is like laboratory work. This is the only way to get to the bottom of the problem.
Trust us: even if you won’t be looking for a job or applying for a loan anytime soon, solving these problems now will pay off. Finding a job is stressful enough. Don’t add unnecessary pressure by failing to keep up with your credit report.
Robin Hartill is a certified financial planner and senior editor at The Penny Hoarder. She writes the Dear Penny personal financial advisory column. Send your tricky money questions to [email protected].
This article originally appeared on www.thepennyhoarder.com