How bad credit can jeopardize your job

You think because you won’t be applying for credit in the short-run –you already have a mortgage and won’t be replacing your car in the near future- you can stop worrying about your credit report? Think again. The state of your credit report can affect anything from how much you pay for your homeowner and auto insurance to the interest rate on your credit card balance. Most importantly, a poor credit report may cost you your job -if you’re employed-, or bring your job search to a screeching halt.

I’m assuming that by now you know all the basics about credit reports and credit scores, and the impact that these can have on your financial life. If you don’t, I strongly suggest that you stop reading this article and get up to date as soon as possible. The best place to start is Pulliam Weston’s book Your Credit Score, Your Money & What’s at Stake.

If you’re already familiar with the essentials, it’s time to pay attention to a crucial fact about credit that isn’t covered by most basic texts and websites: Employers have been checking credit reports from current and prospective employees for a long time, and they can use their findings to rank workers when the time comes to hire new employees or dismiss some of the existing ones. In the midst of the current financial crisis, these credit checks become even more significant for two reasons:

  • Companies all over the country are struggling, and some of them have no option but to lay off workers in order to decrease costs. The state of a worker’s credit report may tip the balance in the decision of whom to keep and whom to let go.

  • As a consequence of the mass layoffs we’re currently experiencing, many people will face long periods of unemployment that may leave them unable to pay their bills on time. This will tarnish their credit reports, which in turn may cost them future employment opportunities.

The number of employers running credit checks is on the rise, with up to 50% routinely asking job applicants for permission to pull their credit report. Workers have started denouncing the practice on the grounds that credit isn’t a good predictor of achievement in the workplace. Tiffany Hsu writes in the Los Angeles Times that even the experts agree that “there’s no clear link between credit history and job performance”, especially when bad credit is a result of unforeseeable circumstances such as unexpected medical costs or divorce.

Employers, however, are not willing to take a chance. In their view, a person who is able to handle credit responsibly is more likely to show this responsibility and adherence to rules on the job. This should make keeping a clean credit record your top priority if you’re unemployed or at risk of losing your job. And even more so if you’re applying for positions that involve handling valuables or classified information –banks, jewelry shop owners or the Government are more likely to inquire about your credit history.

So what should you do if you’re looking for a job or worried you may be laid off? If you’re in this position, you should take extra steps to ensure you do all of the following:

  1. pay your bills in time,

  2. reduce your credit card balances, and

  3. stay well below your credit card limit.

But what if your credit is already in poor shape? In this case it’s even more essential that you follow these steps. If you keep adding positive information to your credit report for a sustained period of time, it will be easier to convince employers to disregard previous unpaid accounts as short-lived troubles that now belong in the past.

The main point to remember is that whatever the state of your credit report, you can start working today to make it better. But you have to take action: put in place the three steps above and in a short time you’ll begin to accumulate the sort of positive credit events that can make a difference in your working life.

TALKBACK

  • Have you ever been asked by an employer for permission to check your credit report?

  • Do you think you may have been denied a job because of your credit history?

PLEASE LEAVE YOUR COMMENT HERE

Advertisements