Don't let bad credit keep you from landing a job
Dear Credit Score Report,
How
do you improve your credit score when looking for a new job? In my industry, a
good credit score is a must, as it speaks of responsibility and integrity. However, sometimes financial hardship is hard to overcome, especially
when going to school. My question is this: How can I improve my credit score
and get a better job -- especially if my credit is below my industry
requirements? Yes, I am in between jobs. -- Kim
Hey Kim,
While you're in a tough spot right now -- you need good
credit to land a job, but you may need extra cash to improve your credit --
experts say that with the right combination of personal finance habits and job
application practices, you should be able to find work.
Your email didn't say what industry you're in, but there are
only a few that consider job applicants' credit histories. (Credit scores, on
the other hand, shouldn't ever be viewed by employers.) According to Andrew
Bernstein, a certified personal finance counselor with DebtHelper.com in West
Palm Beach, Fla., expect a credit check when applying for positions with the
military or government, a job that involves handling large amounts of money or
a job that require workers to be licensed or bonded.
The Society for Human Resource Management (SHRM) says that
only 13 percent of employers check the credit of all job applicants, compared
with 47 percent that conduct checks for select applicants. SHRM research shows
you're most likely to have your credit checked if you're applying for a job
that involves a company's finances or for a senior executive position. Additionally,
at least four states have enacted laws that limit the use of credit information
in hiring decisions. So if you're concerned that bad credit will keep you from
getting hired, you may want to consider pursuing employment in different
industries, different roles or different states.
But as long as you're willing to put in the effort to
improve your credit, you don't need to give up on your chosen career. To start,
make efforts to clean up your existing credit history: Get copies of your credit reports
and look them over for any damaging items that could pull down
your score. If those items appear to be listed in error, you should dispute them. If they are correct, use them to guide you. For example, missed payments
or high balances should encourage you to get current on your accounts or make
additional payments. Those actions will also help to improve your credit, since payment history and amounts owed are the two biggest components of your credit
score.
To free up some cash for those purposes, you'll probably
need to create a budget. "To do so, the person must track spending for
approximately one month. They must write every item they purchase in a
notebook," Bernstein says. At the end of that month, add up all spending
for an honest total of your expenses. Then, compare your household income to
those monthly expenses.
Realize you're spending too much money? Expenses such as
food and drugstore purchases are a good place to make some cuts. "Ways to do
that are cutting coupons for the grocery store (from the newspaper or online),
getting the store fliers and buying store brands instead of the nationally
advertised brands. All these things can honestly save up to $100 a month, which
is $1,200 a year and $5,000 for five years," Bernstein says in an email. He
also suggests eating at fewer restaurants, buying fewer indulgence items,
comparison shopping for everything, eliminating cable TV and Internet service
and volunteering your time rather than donating money to charities or your
church.
It will take time to rebuild your credit, so let any
concerned employers know you are working toward that goal. Additionally,
highlight examples of your honesty and integrity. "Get letters of
reference and, if need be, letters from past creditors so any potential
employer knows you tried your best to resolve financial issues," Bernstein
says. One reference letter should come from a former employer and the other can
come from someone who can vouch for your character, such as a former co-worker.
Provide the letters to a potential employer along with your other job applications
materials.
The overall goal is to demonstrate that you are trustworthy
and can get things done on time, says Natalie Pankow, a credit adviser with the
Jewish Vocational Service employment and training services agency in Chicago.
"It's not credit per se, but it's showing the things that a credit history
would show and what employers are looking for," she says.
Good luck!
--Jeremy
See related: Free credit reports: How to get the actual free one, How to dispute credit report errors, States stepping up to limit pre-employment credit checks, How your FICO credit score is calculated: Payment history, How your FICO credit score is calculated: How much you owe
Jeremy M. Simon is a former CreditCards.com reporter who wrote about credit scoring, economic data, credit card crime and other issues. He is based in Austin, Texas. He is a graduate of Vassar College and has previously worked for Thomson Financial in New York City, where he wrote about the stock markets, and Texas Monthly, as well as several publications in Austin.
Send your question to The Credit Score Report.
Published: September 20, 2011
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