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The soon-to-be-grad’s guide to employer credit checks

Prepare your credit for your job search, just in case companies check your history

Summary

You’ve crammed for many tests and are about to get your diploma. But there’s one more thing to learn about before you hit the job market: the ins and outs of employer credit checks. Here’s how to get your credit ready for the job search in case an employer pulls your credit report.

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You’ve crammed for many tests and are about to get your diploma. But there’s one more thing to learn about before you hit the job market: the ins and outs of employer credit checks.

Employers are increasingly using background screening, including credit checks, to prevent embezzlement, fraud and other workplace issues, according to a 2018 survey by HR.com and the National Association of Professional Background Screeners (NAPBS).

The survey of over 1,500 human resources pros found almost 1 in 3 companies (31 percent) do credit checks for some candidates based on the position for which they’re hiring, and almost 1 in 6 (16 percent) do credit checks for all job candidates. The good news for job seekers with shaky credit: nearly half of all companies (47 percent) never pull your credit.

“Not every employer does a credit check,” says Mark Vickers, research coordinator for HR.com. “Right now, you’ve got about a 50/50 shot.”

See related:  Employer credit checks: Who does them, how they work and what laws apply

Employment credit checks 101

You probably never learned this in college, but an employer can check your credit after you apply for a job.

Before doing any employment background check, including a credit check, your future boss must first:

  • Give you a document explaining that they might use information from the background check to make a hiring decision.
  • Get your written permission to do the check. But if you refuse, the employer can nix your application for the job.
  • Tell you if they do not hire you because of something in the report. If this happens, they have to give you a copy of the report, a summary of your rights and the name, address and phone number of the company that did the background check.

An employment credit check is slightly different from the type of credit check that happens when you apply for a loan because an employer does not see your credit score, says Melissa Sorenson, executive director of the NAPBS.

“They will see a credit history with delinquencies, bankruptcies, those types of things,” she says.

Employers may want to weed out prospective hires who are having serious financial problems and might be tempted to abuse the company credit card, pocket petty cash or even get distracted by constant collection calls on the job, says Melinda Opperman, chief relationship officer for Credit.org, a nonprofit agency that offers credit and financial counseling.

Employers are most likely to do credit checks when the open position involves some kind of financial responsibility, such as doing audits or handling financial accounts, Vickers says.

Employers may check your credit for office assistant or customer service jobs that involve running to the store with the company credit card or handling the personal information of customers, says Jennine Leale, an HR consultant for businesses.

“What they’re looking for is financial responsibility,” she says.

See related:  Employers running credit checks on job applicants must tread carefully

Get your credit in working order

It’s smart to check your credit at least a few months before you toss your cap in the air and start sending out resumes. After all, you don’t want that pizza tab you racked up on credit in college – and forgot to pay – to stop you from snagging your dream job.

Check your own credit

It’s best to look over your own credit way before your future boss does. Go to AnnualCreditReport.com to check your credit for free once a year with each of the major credit bureaus. Scan your reports for any errors, negative information or erroneous accounts that could throw up red flags to an employer.

Fix credit problems before you apply

Can you get a job with bad credit? Maybe, but it’s best to do whatever you can to fix problems before you begin your job search. Here are three possible credit problems a soon-to-be college grad might face, along with advice on how to fix them:

No credit: Work to boost your credit. You might lack a credit report if you’ve never had a credit card, student loan or other credit accounts. In this case, it’s a good idea to start building a credit history before you graduate.

One easy way to get started is to apply for a college student credit card. If you don’t qualify for an unsecured student card, you may want to get a secured card or ask if a parent with good credit will add you as an authorized user to one of their credit card accounts.

Another option: Experian recently began offering Experian Boost, which lets you add your mobile phone or utility bill to your credit so you can get credit for making those on-time payments.

Errors: Make corrections on your report. What if you do have a credit report and you spot a glaring gaffe? Believe it or not, the credit bureaus do make mistakes. Common errors on credit reports include: mixing you up with someone else who has a similar name, erroneously reporting an account as delinquent and listing the same debt twice.

If you spot an error, use this sample dispute letter from the Federal Trade Commission to file a dispute with the credit bureau. The bureau must investigate, usually within 30 days, and give you the results in writing.

Shaky credit: Work to improve. So what if that negative information on your credit report is 100 percent accurate?

“Don’t freak out,” Opperman says. One or two late payments probably won’t keep you from landing a job. Even if you have bigger problems, you can take steps now to improve your credit.

Set up alerts on your phone to make sure you always pay bills on time from now on. Consider paying off any debt in collections, which will get it marked as paid. If you’re not sure about the pros and cons of paying a debt in collections, or you need help with budgeting or debt repayment, consider meeting with a nonprofit credit counselor.

You may also want to take advantage of your right under the Fair Credit Reporting Act to add a 100-word statement to your credit file where you can explain what happened to cause a credit blemish and what you’re doing to fix it, Opperman says.

Know why bosses check your credit

When employers peruse your financial accounts, they’re not looking at your credit in the same way as a loan officer, who might take note of how long you’ve had credit, how many accounts you have and whether you’ve got a good mix of credit, such as an auto loan and credit cards, Opperman says.

“Employers are looking for major derogatories,” she says.

That’s credit speak for negatives like auto repossessions, collections and charge-offs. Unfortunately, some business owners or managers also get cold feet when they see tons of debt, including large student loan debts. That’s bad news since the average graduate in 2017 left college with $34,000 in student loan debt, a number that shot up by 70 percent over 10 years.

Start thinking now about your student loan repayment options so you can tell your future boss you’ve got a plan.

Prepare to explain credit glitches

If you know you have less-than-stellar credit or even just a large amount of debt, be prepared to offer an explanation in the job interview. Employers may cut you some slack, especially if bad luck contributed to the credit problem and you’ve taken steps to fulfill your financial obligations, Opperman says.

For example, maybe you got hurt in a car accident and got hit with big medical bills that went to collections, but you made arrangements with the creditors and are working to repay your debt.

“It’s not financially irresponsible to have circumstances out of your control,” she says. “Being honest and transparent is the best thing you can do.”

Look at the big picture

Employers may be looking at your credit as one way to help gauge your level of responsibility and integrity. Try to demonstrate those qualities in other ways during the job interview to help your possible future boss look beyond your credit reports.

Research the company ahead of time. Dress for the role you want at the company. Show up for the interview on time. Bring copies of your resume and references in a neat folder. Ask questions during the interview. And follow up with a “thank you” note after the interview.

“Those are just sort of the basic job search 101 things that not everyone does,” Vickers says.

See related:  How to read and understand your credit report

Know your employment credit check rights

If a company decides not to hire you based on something in your credit report, you have the right to obtain a copy of the report if you request it within 60 days and also to dispute the accuracy of any information in the report, according to the U.S. Federal Trade Commission guide to employment background checks.

If you start thinking about your credit and learning about employment credit checks now, you’ll have one less thing to worry about when you get your degree and start the hunt for your dream job.

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Published: April 23, 2019

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