Job interviews can be one of the scariest and most intimidating experiences a modern employee has to endure. You have to put across the best version of yourself to a room full of strangers, knowing that if you fail, the prospect of making a living, at least for the time being, could fail with it.
As is so often the case with anxiety, the worst part of this whole experience is the build-up and the worry that goes with it. You have to think about what you’re going to wear, what you’re going to say, how you’re going to come across—you create all these scenarios in your mind to better prepare yourself, to see yourself through their eyes, and to give yourself an idea of how you’ll be perceived.
But there is one aspect that you might not consider, even though it’ll be near the very top of your prospective employer’s agenda: your credit score. If that comes as a surprise, you’re not alone—keep reading to learn more about your employment credit report and for an answer to the increasingly poignant question, what do companies look for in a credit check?
Starting in 2019, Companies are Running Your Credit
Employers are changing how they scrutinize applicants, using methods that rely heavily on credit checks. According to a recent report by the National Association of Professional Background Screeners (NAPBS), nearly a third of companies run credit checks on some of their applicants, while half of those run checks on all applicants.
Employers use third-party services to acquire this information, and these requests are more popular than ever, experiencing a huge surge in 2019. These checks are more common in the financial sector, where experts predict they will be used on every applicant before the end of the year, but they are becoming increasingly common in other sectors and could be the norm for all employers within the next couple years.
This is a scary prospect for the 80% of Americans that find themselves in debt, and it’s potentially dangerous for the 32% who default on loans and credit card payments, but there are ways around it.
How A Credit Check Can Affect Your Hiring
Although it seems preposterous on the surface, it actually makes sense for a company to run employer credit checks. Statistically speaking, an employee in debt is more likely to commit theft or fraud. That’s not to say that everyone with bad credit will steal and that everyone with good credit will play by the rules, but if you’re an employer hiring thousands of workers you should, statistically speaking, experiencing fewer issues if you stick with the latter.
This is even more relevant in jobs where the employee is tasked with managing money (for the business or its customers), as the employer might question their ability to perform the job when they couldn’t manage their own finances. It also indicates a lack of responsibility and poor management skills.
Again, it doesn’t mean that just because you’re in debt you will be bad at managing your finances/life and will steal at the first chance you get, not at all. And it’s almost certainly a form of discrimination that probably shouldn’t exist. But it does exist, and it’s something prospective employees need to be prepared for.
With that in mind, what do companies look for in a credit check?
Job Credit Check: What They Look For
Employer credit checks are performed using a similar process to the one you use to view your report, and they will see something very similar, minus a few redactions. It’s therefore imperative to keep a close eye on your credit report and make sure it’s as prepared as you are for that all-important job interview.
An employer will look for defaults and will also check to make sure you pay your bills on time and manage your money carefully. If you have opened a lot of accounts in a short space of time then that will be a huge red flag to them and could indicate financial instability. Conversely, if your report is empty and devoid of any credit accounts, it could indicate a level of inexperience that will be equally off-putting.
If an employer runs a background check credit report and uses it as a basis not to hire you, there isn’t much you can do and you’d be hard-pressed to even prove it. However, if you beleive they have used the results generated by this report to reject you based on race, sex, age or gender, you can file a complaint with the Equal Employment Opportunity Commission (EEOC).
How to Fix Your Credit
To prepare for employer credit checks you need to make sure your credit report is as clean as it can be. In the first instance, request your credit report from one of the leading credit agencies. Once you have it then you’ll be able to see what prospective employers see during employment credit report checks, and you can start fixing some of the issues:
- Dispute any missed payments or defaults that are incorrect.
- Ask for old defaults and missed payments to be removed by providing a valid excuse.
- Restructure your bills to reduce your debt.
- Keep cleared credit cards active (more on that below).
- Avoid opening new accounts.
- Pay more than the minimum repayment amount.
- Pay off the highest interest debts first.
If none of the above are relevant or you’ve already tried them and still find yourself trapped in an inescapable amount of debt, contact a debt specialist today for free.
Understanding Credit Card Debt
Contrary to what you might have heard, a credit card is not wholly damaging to your credit score. If used properly, a credit card can actually help you to improve your score. Credit is based on reputation after all, and if you can prove that you’re capable of paying back the money that you borrow then you’ve proven yourself a viable borrower.
Of course, it’s a different story if the credit card isn’t being paid off every month or if you start falling behind with your payments. At that point you’re borrowing more than you can repay, getting into serious amounts of debt and looking like the last person anyone would ever want to lend to.
If you find yourself in a similar position one of your first priorities should be to clear your minimum repayments every month, reduce your outgoings, and pay that card off as soon as possible. Once it’s paid off, however, you shouldn’t be so quick to get rid of it.
Yes, it might be a temptation that you don’t want, but it can also improve your credit score. A significant portion of your score is based on the ratio of available credit to debt. If, for instance, you have a credit card with a maxed-out limit of $20,000, your score will be much worse than if that same card had a limit of $100,000 and a debt of $30,000—the debt might be greater, but not relative to the credit. By cancelling your cards once they have been cleared you’re reducing that ratio and lowering your score as a result.
Credit Building Cards
Credit cards can be a help or a hindrance, but if you’re young and are just starting out on your credit journey, credit cards are a luxury you probably can’t afford. Simply put, if you don’t have the credit history or the collateral, the major providers won’t be interested and the only cards available to you will come with low limits, extortionate interest rates and high monthly fees.
In such situations the best options are something known as secured credit cards, also referred to as “credit building” credit cards. These are essentially prepaid cards secured against an amount that you provide. You give the provider $500 (as an example) and in return they give you a card that has a limit of $500, negating the risk of high-credit balances while still giving you something that can be used to make secure purchases online and offline.
A secured credit card helps to steadily build your credit rating and in many cases, once you have been using the card for a few months the provider will allow you to make a direct switch to one of their unsecured cards.
Here are a few of our favorite secured credit cards right now:
- Capital One Secured MasterCard: Get a higher-limited unsecured card after 5 months of repayments.
- First Progress Platinum Prestige MasterCard: Up to $2,000 secured credit limit.
- Discover It: Get 1% to 2% cashback on up to $1,000 worth of purchases.
- Citi Secured MasterCard: Open an account with just $200.
How Building Credit Can Get You a Better Career
If you find yourself stuck in a cycle of applying for jobs, going through interviews and having nothing but frustration to show for it, employer credit checks could be the reason. Applicants spend so much time stressing about saying the wrong thing in the interview or writing the wrong thing in their CV that they overlook what could be one of the most important parts of the process.
To truly prepare for an interview in 2019 and beyond, you need to assume that a background check credit report will be requested, an employment credit report will be scrutinized, and you will be judged on your financial history.
To give yourself every chance of succeeding and beating other applicants to the post, you need to work on your credit report as much as you work on your CV.