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Why Having A Low Credit Score Can Affect Your Employment

During the hiring process, an employer might review an applicant’s credit history to obtain information regarding his or her potential performance. Credit checks are often performed on applicants for jobs that entail security clearance and access to funds, confidential company information or customer data. Numerous late payments could reveal that the applicant struggles with organizational skills and fails to follow through with his or her obligations. This could also be an indication that the person might not be the right candidate for the position since he or she cannot handle personal finances. Having large amounts of debt and limited credit might cause the applicant to be viewed as someone who could be possible of theft or fraud.

All of those reasons and more is why it is becoming more and more common for employers to run credit checks – in addition to the customary criminal background and employment checks – on job candidates. So you can better prepare for your job search, arm yourself with the information provided below on what affects your credit standing and how to fix it.

What Affects Your Credit Score?

Your credit report, which is a record of your credit history, will include a list of companies or people who have made inquiries about you. In addition to employers, lenders, insurance companies, telephone and utility companies and landlords, might also make inquiries about you. This information is generated from creditors, such as credit card issuers and auto finance companies. Once the employer is done using the credit report, he or she must dispose of it in the manner that makes the information unreadable, such as burning, shredding or disposing of electronic documents.

Your credit score is a number that is influenced by the information in your credit report. The score is essentially a summary of your credit history and is designed to help lenders project the probability of you repaying the loan and making payments when they are scheduled. Credit scores can also be used by lenders to determine whether or not to provide you credit, the breakdown of the terms, or the decided rate you repay the loan. Your credit score is impacted by numerous factors, such as:

  • Payment history.
  • The total amount owed.
  • Duration of credit history.
  • Types of credit.
  • New credit.

Credit scores will be negatively affected in the case where the amount you owe is close to your credit limit. Payment history includes late payments, declaring for bankruptcy and if you had an account referred to collections. Scoring systems will consider the number of credit cards you have applied to. Typically, applying for too many new accounts can cause your credit score to experience a negative hit. The scoring system might also consider the number of inquiries made for your credit report. Not every inquiry is listed on the credit report, such as prescreening from creditors.

For the most part, negative credit information will remain on your credit for seven years. In the instance, you have filed for personal bankruptcy, the information will stay in the credit report for 10 years. While information regarding a lawsuit or unpaid judgment placed against you can remain on the credit report for seven years or until the state of limitations complete. Information covering criminal convictions will remain on your report indefinitely.

Protective Laws

In some instances, states and cities throughout the country have established laws prohibiting employers from checking candidates’ credit scores. However, because of the Fair Credit Reporting Act (FCRA), employers must notify candidates that they are going to review their credit scores. The notice must be clear and conspicuous, and not cluttered around other bodies of text. The employer must also have written consent from the applicant as well to go through with the process. The employer must provide the applicant with the name, address and phone number of the credit bureau that distributed the credit report. When provided with this information, the individual is allowed to request a free credit report within 60 days of being noticed.

Along with those requirements, the employer must provide an official adverse action notice if he or she plans to not hire an individual based on the findings in the report. This must also be accompanied by a copy of the report he or she received. Employers are restricted from applying this process to applicants based on their color, race, nationality, religion, sex, disability, age or genetic information. An employer might also be required to make an exception to a financial requirement for a person who is dealing with a disability. These laws are strictly enforced by the Equal Employment Opportunity Commission (EEOC) and ensure that each applicant is treated fairly.

Finding Your Credit Score

There are four main ways to retrieve a copy of your credit history report and view your credit score. You can first check your credit card or other loan statements. The majority of credit card companies offer credit scores for each of their customers every month. The score can be located on a monthly statement or when you log on to your credit card account. You may choose to discuss your credit score with a non-profit counselor, at which time, he or she will review and explain your credit score. Using a credit score service can be help as well. Numerous websites will provide you with the service for free or will require you to pay a monthly subscription fee. You can also choose to buy your score directly from a credit reporting company.

Improving Your Credit Score

When faced with a low credit score, there are an array of different ways for you to improve your score. Reviewing your credit report regularly enables you to catch any possible errors made towards your credit. Checking for incorrect late payment postings or amounts owed are key when reviewing your credit report. Make sure you never miss a scheduled payment, as this is one of the major contributors to having a poor credit score. Reducing a high amount of debt will also go along way on approving your credit score. You might also consider meeting with a credit counseling representative so he or she can assist you in managing your finances and debt. Credit counselors will typically help you establish a budget so that you can efficiently live without getting yourself into further debt.