16 Aug Can You Pass an Employee Credit Check? The Top 4 Negative Items An Employer Looks For When Running a Credit Check.
You’re feeling good about your new job interview. If you nail this job it will quench the thirst your career has been craving. You’re confident and you’ve been practicing those interview questions all night. You even purchased a new suit for this specific occasion. As you’re completing your job application…there it is…the infamous Employment Credit Check Authorization Form! Now your palms are sweaty. You know you would be perfect for the job but if this employer runs your credit, your reputation will be DESTROYED!
The Society for Human Resource Management surveyed a number of employers and the results were alarming. Sixty percent of the employers surveyed said they perform credit checks on all or most potential new hires.
Some would question whether or not credit checks are fair when making a decision to hire a candidate but supporters of it believe that it is no different than checking a candidate’s references. However, opponents see it as unfair. We are still recovering from the financial hardship of the economy. Divorce, job layoffs, and unforeseen medical issues, can cause even the most responsible person with perfect credit to see a negative impact on their credit report.
The types of negative information employers look for during the hiring process are:
- Outstanding judgments (lawsuits that are filed in court)
- Active accounts in debt collection (accounts sold to collection agencies)
- Bankruptcy
- High debt to income ratio (maxed out credit cards or credit cards over the limit)
Several ongoing case studies conducted and researched by financial literacy groups expressed to employers that the people who suffer from financial stress have an increase in absenteeism and have low productivity. This will in turn cause an increase in health care costs.
Some employers view a severely damaged credit history as a potential red flag for character issues. Dana Richards who is a Human Resource Director for a prestigious accounting firm stated that their company focuses more on stability when looking at a candidate’s credit history. For example, numerous addresses and phone numbers is a sign that the candidate moves around or has a hard time committing.
Bethany Holiday is a Human Resource Manager at a high-end boutique and she stated that when they perform employee credit checks, they tend to look for what is called “jump ships”. Jump Ships are labeled as people who obtain services for a period of time with a service provider, become delinquent or default, and will “jump” to another service provider (usually the competitor) before they’re caught, or their services has been disconnected. For example, obtaining cellular service with AT&T, neglect to pay the bill then switch over to T-Mobile before AT&T can catch them in time to disconnect their service.
So, what should you do in order to prepare yourself for an employee credit check?
- Check your credit reports before your potential employer does. If you are unemployed and plan on rejoining the workforce, you are entitled to a FREE copy of your credit report from Transunion, Experian, and Equifax.
- Make sure your credit report is accurate. If your credit report contains errors, inaccurate, or outdated information, you have the right to contact the credit bureaus and request that they investigate the information.
- Tell the truth and be up front. If you have hit financial hardships in the past, be up front and explain the situation to the employer. We are human and unforeseen circumstances happen. Inform them when the credit crisis hit and how it may be consistent with the negative impact on your credit report during that specific time. Employers can be very understanding.
- Bounce back! Now is the time to get your overall finances together. Create a plan of action on how you intend to get your finances back in order, and then implement them. Start with at least obtaining all three of your credit reports and revising your budget.
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