Tuesday, September 16, 2014

Employers and Credit Checks

It is become a major topic of conversation on many job search and career sites.  People are talking about it with their friends and family members. I'm referring to the growing trend of employers using credit reports as a way of finding the "best" employees to fit their firms.  What this means and how it actually affects individuals is often poorly understood!

Who's checking and why?
Traditionally employers in very sensitive and high profile industries.  These have included the finance industry, defense firms, chemical and pharmaceutical companies.  However increasingly more firms in less sensitive industries are picking up this trend as a way of whittling through long lists of candidates.
Reviewing of credit reports are being used as an indicator of an applicants financial honesty and personal integrity.  Unfortunately, a credit report isn't always a great indicator of either, especially if negative credit items are the result of being unemployed!

Consumer protection
In all cases, an employer must get your permission to check your credit report.  The report that employers do receive is modified in a way that shields some consumer information such as account numbers, year of birth and references to your spouse.  Additionally, if a negative decision is made based on information in your credit report, the employer must send information on how an individual can get a copy of their report.  Most importantly, an employer can not access your credit report without your permission.

What you need to do:
Understanding that the reviewing of credit reports is being used as a way to help shrink the pool of potential candidates and make hiring decisions more efficient, there are ways of addressing negative items and ensuring you aren't automatically placed in the "No" Pile.
  • Get a copy of your credit report from AnnualCreditReport.com: By knowing what's on your report you can identify any negative items.
  • Be proactive: If you think something on your report may be keeping you from getting a job, take steps to address it with employers
    • Write a letter to a potential employer detailing the life situations that caused the negative credit report item:  Highlight any steps you took to rectify the situation. 
    • If the item is current or fairly recent, develop a plan on how you will improve the credit report:  Contact creditors or collection agencies to set up payment plans or negotiate payments or settlements. If you can't make payments due to your current situation, e.g. unemployment or under employment, discuss steps you will take when you are able.
    • Focus on steps you are taking to ensure that your future credit performance stays positive.
    • Stay away from excuses and wording that may be perceived negatively: For example, saying that I simply forgot to make my payments could show a lack of attention to detail.
  • Remain positive: Talk about the changes you will make going forward and how you won't let money problems distract you from your work life.