A new job application requires you to polish your resume, compose a cover letter, and prepare for the interview. But before you send in your next job application, you should also focus on improving your credit score. Your credit score could influence your prospects of landing a new job because employers are now checking applicants' credit reports before considering them for the position.
What Is a Credit Report?
A credit report, or credit check thoroughly analyzes your credit history created by a credit reporting agency. Lenders use reports and other information to assess your credit score. Credit bureaus gather financial information about you and compile credit reports based on that information.
Your payment history and current and previous debt are recorded in your credit report. It's essential because it can impact many aspects of your life, including your ability to obtain a loan, rent an apartment, buy a house or car, or even be employed in a job. It’s also important to know how long your credit information and history stay on your credit report.
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TAKE ME THEREWhat a Credit Report Is Used for and Why It Is Important for Your Employers
Numerous companies look at your credit report while making hiring decisions about you. Banks, insurance, financial companies will review your credit history before taking you on. Essentially, any company that has you dealing with other people's money will want to know what your financial capabilities are. If you are paying back a low credit loan, and making your payments on time, this will do wonders for increasing your credit score.
Once you've accepted a job offer (or perhaps a promotion), the employer will ask a third-party business to do a credit check on you. Identification details, including your name, address, and Social Security number if you are in the USA or Social Insurance Number (SIN) if you are in Canada , are all included in an employment credit report.
It reveals all of your bills, including credit card debt, auto, house, and student loans, as well as your payment history for these loans, including any late payments.
Roles of Credit Report in Employment Decision
In addition to what employers look for in a new hire, the main reason why so many employers run background checks during the hiring process is to safeguard their clients and workers. The credit report can be used for security reasons to check someone's identification, education, and financial history, and to stop fraud or embezzlement.
They also show whether you're in financial trouble. These qualities are significant to employers. If a potential employer checks your credit, it is typically the last thing they do after they have already decided whether or not to hire you. Credit checks aren't always utilized to whittle down a large candidate pool; not all businesses use them because they take time and money.
Candidates applying for financial responsibilities within a firm or any position requiring money management are more likely to have a credit check performed by an employer.
What Do Employers See When They Check Your Credit Score?
When an employer reviews your credit report, some information they will have access to, while others will be hidden. Employers have access to a thorough background check because lenders and employers typically see many of the same credit report details. Here is what the employer will see when they review your credit report:
- Identification details like your full name, address, and email
- Your payment history, i.e., every transaction made by you
- The aspects of your employment or work history
- Bankruptcies and debts owed
- Unpaid bills
What the employer won’t see includes
- Your credit score
- Marital status, birth date, race, and religion
- Your income
- Medical bills (if you are in the USA)
- The account numbers on your credit account.
How to Prepare for a Credit Check by Employers
By checking your credit in advance, you can see what a potential employer would see and possibly take steps to remove any incorrect negative marks. Each of the three credit agencies is required to provide you with at least one free credit report every year. If you find mistakes, have them fixed through a dispute procedure.
Once you've done that, maintaining a clean credit record is a wise financial decision that will safeguard your credit score. Here are some ways to improve or maintain good credit:
- Pay off your bills on time. Making on-time payments increases your scores while preventing late marks from appearing on your report because payment history has the biggest impact on your credit score.
- Don't overuse the credit you have. It's recommended to never use more than 30% of your available credit on any card; the lower the percentage, the better. It demonstrates that you are not financially strapped and raises your credit ratings because credit usage is the second-largest factor affecting credit scores.
- Regularly check your credit report. You can check your free credit report and score at any time on some personal finance websites, such as CreditKarma.ca, which offers an opportunity to keep an eye out for errors frequently.
FAQ's
Here are the most commonly asked questions surrounding credit checks for employment:
No, a poor credit score alone is not a disqualifying factor for a job. However, an employer may use the information in the credit report as part of their overall evaluation of the applicant.
No, disputes are handled directly between the credit reporting agency and the individual. The employer will not be informed of any disputes.
Yes, employers are required to provide a copy of the credit report to the applicant and inform them of their right to dispute any inaccurate information.
Yes, employers are required to obtain written consent from the applicant before checking their credit report.
Increasing Your Credit Limit Is Not Always a Good Idea
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Read More HereConclusion
Employer credit checks may be subject to stricter state or provincial regulations. They may be required to examine credit reports before hiring new staff. If that’s the case, whenever you are applying for a new job, remember that there is a high chance that the employer will want to review your credit report to be sure that you can be trusted with the company’s finances. So it is advised to have good credit at all times to avoid missing out on job opportunities because of your bad credit report. It's also crucial to regularly check your credit reports to make sure all of the information is true and correct. It's a good idea to keep an eye on your credit scores.
A high credit score opens up more opportunities for you and means you have fewer financial worries. Although getting a job with negative credit is doable, it is always preferable to keep your credit score high. When considering your application, your employer might not check, but there is a potential that it will come up later on when you are already employed, and you will need to grant access to your credit report.
Keeping yourself on the path to financial wellness is not only the best way to keep your credit report clean, but it’s also the best way to secure your financial future. This is where Insurdinary comes in. We have helped, and are helping millions of Canadians make better decisions about money by way of credit card, loan, mortgage, bank account of course insurance products. Our website provides a wealth of information on how to, when to, and why to invest in the right ways to protect your money. Visit us today.
