When you are on the hunt for a new job, being mindful of your credit history can be nearly as important as updating your resume and lining up professional references.
Know the facts
In many U.S. states, employers can review an applicant's credit history as part of the hiring process, but they must first obtain a candidate's permission before pulling his or her a credit report. A company must also disclose that the information in the credit report could be used to make a hiring decision. In cases where a credit report does affect whether a candidate receives a job offer, the employer must provide the candidate with access to the report prior to taking any action, according to the Federal Trade Commission.
Employers who choose to review an applicant's credit report often do so for positions in which a candidate will be responsible for financial information or have access to sensitive documents, such as paperwork with employees' Social Security numbers, according to a survey by the Society for Human Resource Management (SHRM).
The credit checks performed by employers are flagged as "soft inquiries," and will therefore not impact credit scores. Also, the employer will not see your actual score in these reports, just basic personal information, credit history and public-record information such as liens or bankruptcy filings.
Review your report
If you think your credit report might be reviewed by a potential employer, order your credit report beforehand so you can check for inaccuracies that can be disputed and fixed, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling.
"A credit report is your financial fingerprint," she says. "You need to make sure that someone else's information isn't on there. So review it for accuracy and check for identity theft."
It's wise to check for credit report inaccuracies at least one month prior to starting your job search because discrepancies can take 30 to 90 days to rectify, says Thomas Nitzsche, a spokesman for ClearPoint Credit Counseling Solutions. You can quickly perform your own due diligence via AnnualCreditReport.com, which works with the three national credit reporting agencies, each of which provides one free report each year.
Many companies will request access to a candidate's credit report after an interview but before a hiring decision has been made, according to SHRM. It's therefore beneficial for candidates with blemished credit reports to get in front of any issues with an employer beforehand, Cunningham says.
By reviewing your credit report prior to an employer's request to access it, you can be better prepared to discuss any issues. If negative information on your credit report is due to extenuating circumstances, Cunningham says you can explain this with a brief notation in your credit report. "Some employers consider this a very serious issue and you want to address it in a way that reflects that," Nitzsche says.
Don't lose sleep
On a positive note, 80 percent of employers stated they have hired employees with negative marks on their credit reports, according to SHRM's survey. It's unlikely an imperfect credit report will disqualify you from your next job opportunity, but being upfront about your financial situation could help your chances of getting hired.
This content is educational in nature and is not an advertisement for a loan or business solicitation. It does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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