When you are looking for a job, it's important for you to be aware that many employers run employment credit screenings on applicants. Find out more about what employers are looking for and how credit may impact your employment options in this exclusive expert interview with Sam Davidson, Customer Service Manager for Bills.com and Andrew Housser, the company's co-CEO.
Understanding Employment Credit Screening
Why do some employers run credit checks on people who are applying for jobs?
There are various reasons, but the most common is to check an applicant's financial stability and debts. These are important factors for positions that require access to large amounts of money or sensitive information. The idea is that if a person is struggling financially, he is more likely to steal from the employer to try to fill the gap in his finances. Many government institutions, such as the CIA and FBI, scrutinize credit information and financial disclosures when granting security clearances. Also, some employers see having a good credit history as a sign of overall personal responsibility.
What types of things are employers looking for when reviewing credit reports of job applicants?
Usually, potential employers who pull an applicant's credit report are looking for indicators of good financial health. Things that may give a potential employer pause could include a consistent failure to pay debts in a timely manner, excessive debt compared to income (or income from a previous job if the applicant is not currently working) or any unpaid judgments.
Are there certain types of positions that are more likely to require pre-employment credit screening?
Positions with the government or with government contractors for which security clearances are required will almost always require credit checks. Also, banks and other financial institutions often pull credit when hiring for positions that involve the handling of large amounts of money. Also, companies that do use credit reports often use them only for applicants at mid-level management positions and above - although this varies significantly from company to company.
What criteria do employers use when deciding if a candidate meets the credit criteria for employment?
This really depends on the type of job and the reason for reviewing the credit report, and varies from employer to employer. For example, one would expect that the report of a CIA officer applicant would receive much more scrutiny than that of an applicant for a job as a bank manager. Basically, employers reviewing a credit report want to see that the applicant is financially stable, not over-extended, and meeting his or her obligations in a responsible manner. In many cases, if a question arises about something on the report, the potential employer will ask the applicant about the issue to see if the applicant has a reasonable explanation.
Job Seeker Tips
How can job seekers educate themselves to find out what their credit is going to look like to potential employers?
The same things that influence one's credit score, such as payment history and debt load, are what employers are probably looking at when reviewing an applicant's credit report. So, the more job seekers learn about credit reporting and scoring generally, the better. A credit score actually involves three scores from the three major credit reporting agencies - Equifax, Experian and TransUnion. All three are required to provide a credit report. Consumers can access credit reports once each year for free at www.annualcreditreport.com.
What suggestions can you offer for job seekers who want to make sure their credit is in the best possible shape?
- Correct any mistakes. If the credit reports show any inaccuracies, correct them. Under the Fair Credit Reporting Act, the credit bureaus must investigate any disputed items and remove them from the credit report if they cannot be verified. If you disagree with the results of a credit bureau's investigation, you can ask the bureau to include a statement of dispute in your file and your future reports. Remember to keep copies of all correspondence.
- Pay bills on time. On-time payments are very important to good credit. Paying bills on time for as little as one month can raise a modest credit score by 20 points. Pay consistently, and everything possible to pay off balances in full every month.
- Leave as much room on credit cards as possible. Never "max out" accounts or charge up to the credit limit. Keep one or two cards open with low or no balances. This will help the "credit available" aspect of the credit score.
- Understand percentage utilization, an important term in credit score determination. If you have a credit card with a limit of $10,000 and you owe $3,500 on it, that's a 35 percent utilization. Anything over 35 percent is considered is high and can impact credit scores. Over 50 will have a definite negative impact on a credit score, and a maxed-out card will very negatively impact the score. So if a job-seeker has used more than about a third of overall available credit on a card, s/he should seek of pay down the balance to reduce the "debt-to-credit" ratio.
- Do not cancel a credit card with a long history (and a positive payment history). The longer you hold a card, the more valuable it is in your credit score determination.
What rights do job seekers have if they are denied employment based on credit?
To our knowledge, there are no laws that prevent an employer from using an applicant's credit history in making hiring decisions. An applicant could ask the potential employer for more information, and based on that, may be able to explain a situation or factor influencing the score if appropriate.
LoveToKnow would like to thank Sam Davidson and Andrew Housser of Bills.com for taking time from their busy schedules to share information about the employment credit screening process.
