Better credit can improve your job prospects
More employers pull credit reports in hiring decisions
Welcome to Opening Credits, our latest column here at CreditCards.com. If you're just starting out in your credit life and looking for some tips that you can use to better your own credit, you've come to the right place.
You likely already know that credit can be a great financial tool, but if it's misused, it can get you into a heap of trouble. Maybe you're in college and you're using credit cards for the first time. Perhaps you're new to the workforce and are just beginning to use credit regularly. Or maybe you've made mistakes in the past and you're trying to clean up your act -- and your credit -- before you apply for a car loan or a mortgage. Whatever place you're in, or wherever you hope your credit life can take you, take me along as your adviser. I'm looking forward to helping you navigate the sometimes choppy waters of interest rates, credit reports and just about anything else you come up with
So if you're new to credit, or have your first student credit card, or need to start over with credit, please send me your questions. I can't wait to help you begin your new credit life.
Let's get to the first question ...
Dear Opening Credits,
During college, I accumulated about $12,000 in credit card debt, and I also have $65,000 in college loans. I haven't always paid my credit cards on time, but I've been good with the college payments. After taking some time off after school ended, I'm looking for my first full-time job. I've heard that employers look at your credit history. I'm afraid my credit situation could scare off a potential employer. Should I be worried? -- Job Seeker
Dear Job Seeker,
You should be a little worried, yes.
Some employers believe a potential employee's credit standing is a vital piece of information.
If the job involves handling money in any capacity, employers want to know their workers are responsible with their own finances. Bosses have concerns that a worker who is in financial trouble could be tempted to tap the till, or embezzle, company funds.
Before a potential employer looks into your credit, you have to give written permission. Then, the employer can check your standing as long as they comply with the Fair Credit Reporting Act. The company would request a consumer report, such as a credit report, from a consumer reporting agency.
The act mandates that if you're turned down for a job because of your credit, the employer must give you a copy of your consumer report and a Federal Trade Commission information sheet that describes your rights. You can then dispute the report if it's not accurate.
But before you get there, you can take these steps to improve your credit, and also improve your chances of getting the job:
- Know what's in your credit report. Even if the truth is ugly, the first step to repairing credit is to know exactly what you're up against. Federal law requires the three major credit bureaus to give you access to your credit reports once a year; you can access the reports via the Web at AnnualCreditReport.com. (Other sites offer so-called free reports, but they require you to sign up for paid services.)
- Start paying. If you have debts you've been ignoring, call your credit card companies and establish a payment plan. Even if you can't afford much, lenders want to start getting back the money you've borrowed, so they'll probably make a deal. Don't agree to pay more per month than you can afford, or you'll be likely to start the missed payment cycle all over again. Also see if you can negotiate for a better term, such a frozen or lower interest rate.
- Get a secured card. Secured credit cards are a terrific way to rebuild your credit. You deposit a certain amount with the lender, and the lender will give you a card with a spending limit equal to your deposit. Use this card wisely and make regular payments to show you're now being responsible with your money.
- Be straight during your interview. It's possible the potential employer won't ask to check your credit report, so stay mum on the topic unless they bring it up. If they do ask for access to your information, tell them what they can expect to see in your report. If you're upfront about your negative history and show that you're taking steps to improve it, most employers will appreciate your honesty. It will give you the opportunity to state your case rather than let your credit mistakes speak for you.
Of course, you could always say "no" when the employer asks to see your credit report, but that's probably not a good move. Employers will wonder what you're hiding, and they may imagine your situation to be far worse than it actually is.
Good luck with your job search!
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Credit score impact of opening, quickly closing a new card – Your credit scores should revert to where they were before you applied, minus the points you lost with the initial inquiry ...
- Should I be added to new husband’s card or get a new one together? – Joint credit cards are rare these days. It's more common to add a spouse as a authorized user to a card ...
- Card way over the limit? Here's a debt payoff plan – It's rare to go over your credit limit, but when that happens, you need a plan to pay off your debt fast. Get a side gig, sell items, increase your income to erase your card debt to zero ...