You think your credit report is off-limits to potential employers – think again. Today, nearly half of employers (47%) will check your credit score before hiring you, according to a New York Times (2013). Don’t be alarmed, there are some steps even first-time job seekers can take ahead of seeking out new employment opportunities such as update your résumé, references, and LinkedIn profile, and then make sure you clean up your other social media accounts and networks.
What are employers looking for in your credit report?
They look for patterns of money mismanagement — like a bunch of missed payments or multiple collection accounts — could wind up hurting your odds of scoring a place, particularly if that gig involves handling cash, access to sensitive financial information, company accounting or government work. That’s why it’s a good idea to check your report ahead of your job search.
You can pull a copy of your credit reports from each major credit bureau — Equifax, Experian, TransUnion — for free every 12 months via AnnualCreditReport.com.
Certain states, including California, Hawaii and Washington, have banned employers, from screening applicant’s credit in some circumstances. And, in all states, employers can only look at your credit, not your credit score. Plus, they can’t pull your credit without your permission, so if a credit check is part of their application process, you’ll at least have some sought of notice (some form you’ll be asked to sign).
What am I checking for?
First, you’ll want to make sure there aren’t any errors on your file that could needlessly cost you a good job. These errors are more common than you think: a Federal Trade Commission study from 2012 found that one in five Americans had an error in their credit file. If you find one, be sure to dispute it with the creditor and the credit bureau in question. You can learn more about how to dispute a credit report online. Keep in mind, credit bureaus have 30 to 45 days to investigate a credit dispute, so won’t necessarily see that error disappear right away. Hence the reason you’ll want to check your reports before your job hunt kicks into full gear.
Second, if you discover legitimate blemishes, you’ll want to decide if anything can be done to fix them. For instance, you might want to shore up unpaid collection accounts or pay off high credit card balances. Keep in mind, many missteps will stick around for a while as the most negative information stays on your credit file for up to 7 years. (Certain bankruptcies can even take up to 13 years, before they age off – your report.) Still, even if you can’t undo a troublesome line item, you’ll at least know that one is there — and will be able to discuss any issues upfront with prospective employers.
Finally, work on improving your credit overall so you won’t have to worry so much about a dreaded credit pull the next time you’re looking for new employment opportunities. You can rebuild bad credit by using a starter credit card to set up a new and improved payment history, keeping credit card balances below at least 30% and ideally 10% of your total available credit limit(s) and adding a mix of credit accounts organically as your score and/or finances rebound.
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