A stellar resume, outstanding cover letter, great interview and excellent references – sounds like the perfect recipe to land a job. Or is it? Are you missing something? Did you know that your credit can have an impact on your employment prospects?
Stiff competition is a common denominator across all industries and all job posts. You need every advantage possible to land a job, including a good credit score.
As such, we’re left wondering: how to improve my credit score? What information can the employer access? Why do employers perform credit checks?
This article will provide you with the answers to all these questions and more!
Contents
Why Do Employers Conduct Credit Checks?
A potential lender conducts a credit check on the borrower to establish the trustworthiness of the borrower. But why are employers interested in your credit rating?
If you are looking for a job in the law or finance sector, then a check on the credit rating is part of the mandatory background check for prospective employees. The credit report offers an insight into how you handle your finances. In the financial sector, it also indicates your ability to do your job.
Anyone who doesn’t manage their personal finances well cannot be trusted to do so with the company finances or with other people’s finances. Similarly, a person with financial issues can be more susceptible to bribery or coercion. These are the reasons why a credit check from an agency such as Experian, Equifax or TransUnionis mandatory for jobs in the finance and law sector.
But What About Other Sectors?
Well, the way you deal with your finances is indicative of many aspects of your personality. If you have missed several payments of the credit card or have declared bankruptcy, or even if your credit report indicates a financial instability, employers view it as a factor that can negatively impact your performance once hired.
Think about it. Someone under severe financial stress will be preoccupied with those issues and may not be able to deliver their one hundred per cent at the job when compared to someone else who is equally qualified with an excellent credit report.
Financial instability also indicates that you were not very good at managing and planning your finances, or you made some bad decisions. Any company cannot afford to have you make those mistakes while on the job.
In addition to all this, a credit check is also a way to verify the details you have provided to the firm.
What Information Can An Employer See?
A comprehensive credit report includes all details regarding all your debts, including the amount and the repayment history. All of this is private information and not relevant to a prospective employer. The employer is only shown a credit report that contains Public Information such as:
- Name
- Date of birth
- Address
- House repossessions
- County Court Judgements (CCJ)/Individual Voluntary Arrangement (IVA)
- Amount owed
- Bankruptcy status
- Missed payments
- Registered voter or not
A credit check can only be performed with your knowledge and permission. If the employer decides against hiring you based solely on your credit report, then they must inform you about it and give you enough time to respond.
How To Improve My Credit Score?
The impact of credit score exceeds the domain of borrowing money and permeates into quite a few aspects of your life, including employment. Given its significance, it is only fair to want to improve your credit scores.
Well, for starters, you need to find out your credit score. You can do so by checking online from the website of agencies such as Equifax, Experian, Clearscore or Transunion. Any credit score under 600 is considered poor. Here is how you can improve your score is you fall in this category.
Check Your Credit Report For Error Or Frauds
Errors in credit reports are rare, but they do happen. It is also possible that you have become the victim of fraud. Someone else may have applied for credit under your name, causing it to be negatively impacted. If you see either of these happening to you, get in touch with all the major credit agencies and have it rectified as soon as possible.
Close Unused Accounts
Do you have credit cards you don’t use? What about mobile contracts or store cards or accounts? Having too much credit available from too many different sources can negatively impact your credit score report. Make sure you close all such unused accounts. You can even use experian credit matcher to compare the various credit at your disposal and select the ones that you must keep.
Register Yourself For The Electoral Roll
Getting on the electoral roll is a way to establish that you are a genuine creditor. Since the information on the electoral roll is verified, being a registered voter adds to your credibility. You also need to make sure that your address and employment details are up to date. This is also the easiest way to improve your credit rating.
Keep Credit Utilisation Low
Credit utilisation is the ratio of the credit you have used to the credit that is available to you. If you use the majority of the credit available to you, it indicates that you are in deep debt. Ensure that your credit utilisation is below 25%.
Check Financial Linkages
If you have a joint account with a spouse or friend or a relative, and if they have a low credit rating, it could also impact your score negatively. Make sure you disassociate yourself financially from anyone with a bad credit rating.
Use Credit Builder Loans
Credit builder loans are loans for smaller amounts that you can repay easily. You have to make payments towards the loan before you get the money in your account. The lender will hold the cash in an account till you complete the payments. The repayments are recorded and reported to all credit agencies. Therefore, it establishes that you are making repayments on time.
Don’t Let Bad Credit Ruin Your Employment Prospects
While prevention is always the better option, unpredictable situations may have caused you to miss payments or default on a loan. However, if you do not want this to interfere with your job prospects, then you need to take the actions mentioned above to improve your credit score.