Don't let bad credit keep you from landing a job
By Jeremy M. Simon | Published: September 20, 2011
Credit Score Report
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
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.
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
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