How Your Credit History Can Influence Your Future Employment

How Your Credit History Can Influence Your Future Employment

Everyone knows that having bad credit can cost a lot in terms of interest fees, but did you know that it can also cost you a job? That’s right: potential employers may actually use your credit history to determine whether to hire you.

According to the Society for Human Resource Management, 43% of companies polled in 2006 reported running credit checks on at least some of their job applicants. Applicants for airport screening jobs with the U.S. Transportation Security Administration (T.S.A.) have even been rejected for having more than $5,000 of debt.

Clearly, financial history is a factor in employability. The theory that many employers work with is that a good credit history demonstrates a job candidate’s competence at handling money. That is to say, someone with a good credit history is seen by many employers as likely to pay bills on time, liable to control his or her spending, and able to manage his or her budget. Someone who can do these things will generally be perceived as responsible. Someone with a large amount of debt, on the other hand, will often be perceived as irresponsible.

In a tight economy, of course, debt frequently has more to do with job losses caused by corporate cutbacks than with individual irresponsibility. When someone suddenly loses his or her job because of a faltering economy, he or she often has no means of making enough money to cover the bills. The result is a vicious circle: the debtor can’t pay off the debt and as a result becomes increasingly unable to find a new job, and the longer the unemployment lasts, the more debt is incurred with bill after monthly bill.

If you ever find yourself in this situation, these are a few steps you should take:

1. Do whatever you can to minimize your debt. One simple way to do this is by paying with cash whenever possible. Avoid splurges like dinners out and use the savings to pay down your credit-card and other debt.

2. Keep at least one major credit card but avoid having too many. Having one or two cards with a small balance that you pay off on a monthly basis shows that you can handle funds. Owning too many cards, however, even if they all have zero balance, can actually result in a lowered credit score.

3. Get a copy of your credit report. The three credit-reporting agencies should allow you one free copy of your credit report each year. Study it to make sure it’s accurate. Contact the credit-reporting companies if you find any errors.

4. When you apply for a credit card and your application is denied, pay close attention to the reasons given for the denial. (In a similar vein, be aware that potential employers are supposed to inform you if you are denied a job or promotion because of your credit history. If that happens, they are supposed to give you a copy of the report, tell you which company provided the information, and explain how you can dispute it.)

5. Keep in mind that a bankruptcy is not a legally-acceptable reason to deny you a job.

Being aware that a potential employer might utilize credit-card information to determine which candidate gets a job can make a big difference in your spending habits. After polishing off your resume, be sure to take a little time to tidy up your credit history as well.

  1. #1 by Monex on December 16, 2010 - 12:13 AM

    Also other fees and charges apply on your credit card account pursuant to your agreement. Can there be anything more discouraging than paying your taxes with a credit card and owing interest on that balance too?

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  8. #8 by baccoff on March 16, 2011 - 9:01 AM

    It is generated through statistical models using elements from your credit report however your credit report score is not physically stored as part of your credit history on the credit file. Rather it is typically generated at the time a lender requests your credit report and is then included in the report viewed by the creditors…

  9. #9 by oc on May 15, 2011 - 7:25 PM

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  12. #12 by mercadeo internet on November 18, 2011 - 12:29 PM

    A debt repayment plan does not erase your negative credit history. Accurate information about your accounts can stay on your credit report for up to seven years. In addition, your creditors will continue to report information about accounts that are handled through a debt repayment plan. For example, creditors may report that an account is in financial counseling, that payments have been late or missed altogether, or that there are write-offs or other concessions. A demonstrated pattern of timely payments, however, will help you get credit in the future.

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  16. #16 by idebenone on December 12, 2012 - 1:24 PM

    In the U.S., a consumer’s credit history is compiled by consumer reporting agencies or credit bureaus. The data reported to these agencies are primarily provided to them by creditors and includes detailed records of the relationship a person has with the lender. Detailed account information, including payment history, credit limits, high and low balances, and any aggressive actions taken to recover overdue debts, are all reported regularly (usually monthly). This information is reviewed by a lender to determine whether to approve a loan and on what terms.

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