We all know carrying a bad credit score can limit your chances of loan and credit card approval while jacking up your interest rates. But did you know having bad credit could also be keeping you from getting hired for your dream job?
A recent article from the New York Times is the latest to identify bad credit as one of the factors employers consider when determining which candidate is right for an open position. This isn't a new phenomenon by any stretch, but rather a factor made more apparent after the Great Recession helped to wreak havoc on millions of Americans' credit.
Unfortunately, credit doesn't tell the whole story when it comes to someone's attitude and integrity, but more and more it's playing a role in the hiring - and more specifically, non-hiring - process. Of course, a credit check is far from the only factor employers consider when determining who is the right fit for a particular job. But in a job market as competitive as this one, if there are two candidates that are otherwise equal in credentials and one has a poor or below average credit history, there's reason to believe that the (hypothetical) job is going to the applicant with the better financial credentials.
As Credit.com explained last week, credit scores are used as a predictor of behavior. Unfortunately, credit reports don't explain the circumstances behind the scores. Emergency medical bills, a co-signed agreement gone wrong or even an old debt lost in the mail can all have a negative effect on credit scores. What employers see when they run a pull of your credit profile are essentially the "ends" without any of the "means".
According to the aforementioned New York Times article, "nine states have adopted legislation that curbs the use of credit reports to judge prospective hires". That's good news for unemployed Americans on the job hunt with bad credit, but it does nothing to solve the issue that got them into this problem in the first place - their bad credit scores.
Building credit while out of the job is unfortunately a chicken and egg-type problem; you can't get the job without fixing the credit, and you can't fix the credit without getting the job. But there are a few inexpensive steps bad credit consumers can take to to try and improve their credit profile as they hunt for a job.
Steps You Can Take to Build Credit
1.) Get your free annual credit report
Each American consumers is entitled to one copy of their credit report each year. Visit AnnualCreditReport.com to request your free annual copy. This will give you the opportunity to identify what's showing up on your report and, ultimately, making up your score for better or worse. It also gives you the chance to comb through your report and identify any inaccurate information, be it outdated contact information, old debts that should have fallen off your report, or completely false statements that need to be disputed.
If you find any inaccurate information, step two is to request validation and dispute.
2.) Draft debt validation letters
Requesting a validation of debt is the first step in wiping an inaccurate statement off your credit report. Debt validation letters are easy to write (here's a sample debt validation letter from the Creditnet forum) and work to get the ball rolling on removing inaccurate information from your report. These are sent to collection agencies (ideally within 30 days of a first debt collection notice) and, if the collection agency cannot validate the debt they are attempting to request, they're required to remove the debt from your credit report.
Whether you find inaccuracies on your credit report or not, seeing your report as potential employers see your report gives you the opportunity to identify what exactly is hurting your score.
3.) Consider opening a secured credit card
Finally, one option to consider as you attempt to boost your credit score is to open up a secured credit card.
These cards do require an initial deposit that's fully refundable - often anywhere from $200 to $300 - so there is an "investment" necessary for consumers hoping to improve their credit score in the hopes of it helping their overall job prospects.
Secured credit cards can improve credit with responsible use by extending a user's available credit line, improving their history of payments made to lenders and showing a solid recent "resume" when it comes to using credit.
Another prospect for improving your score in the short-term is to ask a trusted friend or family member to add you as an authorized user on their credit card accounts. Doing so essentially passes on the good standing credit account on to your name, while again extending your available credit line and your payment history without requiring any additional work on your end.
As you move forward in the job application process, be sure to check your credit report as well as your resume. As it turns out, both have a pretty good say when it comes to whether or not you're likely to get hired for your next job.
