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Career Advice

Why your credit rating can impact your career

Changing your job can be stressful enough. You feel under the magnifying glass, analyzed and evaluated from every angle. Your experience, your recommendations, even the way you talk or your handwriting, all can contribute to the final hiring decision. On top of these, in some states, you can also worry about the impact your credit report on the evaluation of your capabilities.

The only item that credit bureaus don’t share with a potential employer is your credit score, but they provide a comprehensive list of loans, credit card accounts, delinquencies, bankruptcies, and collections.

Why is this legal?

If you believe that your spending habits and past financial decisions are too personal to share with an employer, you are not alone. If you are fortunate to live in one of these eight states (California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont or Washington), you shouldn’t even worry, since the legislation prevents the employers to run background checks.

Looking from the employer’s perspective, they have a sound motivation related to minimizing risks through all possible channels. An employee with a high debt rate could be more motivated to work hard to pay it, but could also be more stressed and experience burn-out, which is detrimental to their productive abilities.

Why does an employer need your credit rating?

The way you manage your own finances is a good proxy for your risk appetite and your ability to handle money in general. If you are inclined towards overspending or making unhedged investments, this could be a significant warning signal for an employer.

Organization abilities

Any delays in paying bills an and missed deadlines show that you have poor organization skills in your personal life which could translate to making the same mistakes at work. If you state excellent management and organization skills in your resume, but you continuously miss paying your mortgage or even your phone bill you should think about getting your affairs in the right order as soon as possible.

Risk appetite

If you have taken a personal loan to invest in some obscure stock options or to pursue binary trading, this could show your future employer that your hedging sense is not working well. In the eventuality that you are trusted with company money like the payroll or even be put in charge of financial decisions, these poor personal judgments could be translated to a whole different scale, with disastrous results.

What can you do about it?

The best defense is attacking. Therefore, be prepared and ready to answer any questions related to your credit report honestly and looking towards the future.

Do your homework and ask for copies of your credit reports from all three bureaus (TransUnion, Experian, and Equifax).  You are entitled to one free report per year. Compare the information in these documents for accuracy. Studies show that an astonishing number of reports contain errors which can affect both your credit score and your hiring perspectives. First, fix all the identified problems by contacting credit bureaus and sending the right documents for conformity. Although not necessary for hiring, you could also educate yourself about how to increase credit score, just in case you want to get a better interest rate at this step.

As soon as you re sure that your data is accurate, highlight all items that could pop up in an interview like bankruptcy, accounts sent to collection or consistently missing payments. Create an honest explanation for each of them, focusing on the idea that you acknowledge the mistake, you have taken the necessary steps to change your behavior, and you are now a new person. Your employer knows it just takes time for this to show on your credit report.

In conclusion, your employer is only looking for signs of trustworthiness. On the bright side, a survey amongst HR specialists shows that this technique is losing its popularity due to more strict regulations on accessing personal data. It is even expected to disappear en


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