Bad Credit Can Kill Your Job Search

By Career.Builder.com

Asking job candidates to submit to credit checks is gaining popularity among employers, according to a recent survey by the Society for Human Resource Management. Thirty-five percent of employers used credit checks as part of the pre-employment screening process in 2004, up from 19 percent in 1996.

Lots of people have a blemish or two on their credit histories –- a few late payments here, some nasty credit card debt or a bankruptcy there.

It's well-known that poor credit can make it tough to get a car loan or mortgage. But many job seekers are stunned to learn that that their financial missteps can also prevent them from getting a job offer.

Asking job candidates to submit to credit checks is gaining popularity among employers, according to a recent survey by the Society for Human Resource Management. Thirty-five percent of employers used credit checks as part of the pre-employment screening process in 2004, up from 19 percent in 1996.


Why they do it

Credit checks show little about a candidate's work experience or management style, so why do hiring managers even bother with them?

Norm Bour, co-host of the nationally syndicated radio program 'The Real Estate and Finance Show,' says employers are sometimes reluctant to hire people with bad credit because their credit score could signal irresponsibility or over-indebtedness that could interfere with their ability to do the job. For example, a person applying for a $30,000-a-year job with $65,000 in credit card debt could raise a red flag for employers. "The way people manage their money is a strong indication of their character," Bour says.

A person's personal financial management is especially relevant when applying for positions that require routinely working with money -- CFO or accountant for example. And don't think credit checks are reserved for lower-level candidates. "The higher up you go, the greater the certainty that it will be done," Bour explains.


The 411 on FICO

Curious what employers are looking for on your credit history? There are three major credit bureaus in the United States, which continuously receive information from a variety of sources, including credit card companies and courthouses.

From these sources, the agencies calculate your credit score, commonly referred to as your FICO score. According to Bour, your FICO score is a calculation of your likelihood of filing bankruptcy. The higher the score, the better -- a score of 620 or higher is good, and 700 or higher is considered excellent.

Consistently paying bills on time and keeping your accounts in good standing raises your FICO score. But foreclosures, bankruptcies, collection accounts, judgments, late payments and delinquencies can hurt your credit.

According to Bour, it is best to keep between five and seven accounts open, keep long-standing accounts open even if you don't use the card anymore, and never use more than half of your available credit line.


Know your rights

According to the Fair Credit Reporting Act, an employer must request your permission before looking at your credit report. And, if an employer rejects you for a poor credit rating, the employer must show you the report and tell you how to get a free copy from the consumer reporting company.

If your credit score isn't pretty, be up-front about your financial situation with your interviewer – without going into too much detail. For example: "When I started college, I was inexperienced with using credit, and I ran up $10,000 in credit card bills my first year alone. Since then, I've dramatically altered my spending. I am working hard to pay off my outstanding debt, and I haven't missed a payment in more than two years."

Bour estimates 30 percent of credit reports have some form of inaccuracies. To avoid any surprises that may affect your job search, take advantage of free yearly credit reports online from all three agencies: Equifax, Experian and TransUnion. To obtain your free credit reports, visit www.annualcreditreport.com.

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Danita

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March 06 2009 at 1:09 PM Report abuse rate up rate down Reply

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