So you’re nearing the end of the hiring process, and the hiring manager requests your permission to perform a credit check. If you’re prepared, this is no big deal. But if you’re unprepared and have a questionable credit history, it could be a deal breaker.
“For job seekers, honesty is the best policy,” says Alexis Moore, the former owner of a collection agency now a credit collection expert and consumer advocate. She says being open and being prepared to discuss the topic of your credit and financial history is the best way to avoid problems at this stage of the hiring process.
To avoid facing roadblocks due to your credit report in a job interview, follow these tips:
1. Educate yourself about credit reporting and scoring. “The same things that influence one’s credit score, such as payment history and debt load, are what employers likely are looking at when reviewing an applicant’s credit report,” says Kevin Gallegos, vice president of Freedom Debt Relief in Tempe, Ariz.
The more you know about credit reporting and scoring in general, the better off you’ll be.
2. Access your own credit report. You should know what your potential employer is going to see before he or she does, so you can prepare to handle any questions. “A credit score actually involves three scores from the three major credit reporting agencies, Equifax, Experian and TransUnion,” Gallegos says. All three are required to provide a credit report. Consumers can access credit reports once each year for free at AnnualCreditReport.com.
3. Correct any mistakes. If your credit reports show any inaccuracies, get them corrected before your potential employer gets a copy. “Under the Fair Credit Reporting Act, the credit bureaus must investigate any disputed items and remove them from the credit report if they cannot be verified,” Gallegos says. “If you disagree with the results of a credit bureau’s investigation, you can ask the bureau to include a statement of dispute in your file and your future reports. Remember to keep copies of all correspondence.”
4. Share your story. “If you know you have bad credit, it's best to tell the potential employer so you can explain your reasons why,” says Lizandra Vega, author of The Image of Success: Make a Great Impression and Land the Job You Want. “A credit report will only indicate numbers, not reasons.”
For instance, if you were late paying many bills in a single month, “that is not terrible, especially if it is backed up by a loss of job or illness in the family,” says Issamar Ginzbergvery, a credit expert and business consultant. However, if your report showed scattered late payments across different months on different cards, for minor amounts of money, “that would be a sign that [you might be] irresponsible with paying bills, which would lead [employers] to assume that you are not good with deadlines and showing up to work on time.”
5. Work to improve your credit score during your job search. The best ways to improve your score are to consistently pay bills on time, avoid maxing out credit cards, and understand percentage utilization. “If you have a credit card with a limit of $10,000, and you owe $3,500 on it, that’s a 35 percent utilization,” Gallegos says. “Anything over 35 percent is considered is high and can impact credit scores. Over 50 will have a definite negative impact on a credit score, and a maxed-out card will very negatively impact the score.”
Also, reconsider before canceling a credit card with a long history, especially if you have a positive payment history. “The longer you hold a card, the more valuable it is in your credit score determination,” Gallegos says.