Credit and employment are inextricably linked. After all, a paycheck allows you to qualify for new credit, pay your bills and generally honor your commitments. It’s obvious how work impacts credit, but what about the opposite? Few people consider the dangers posed by bad credit when it comes to employment, from landing the perfect job to achieving long-term success. Learn more about employers’ perceptions of credit below. Their perspective may help you during your own negotiations.
You may be wondering why a potential employer would need or want to see your credit report. “Why should they care about my personal finances?” you ask. The truth is, they care more about your behavior than your Nordstrom balance. Items found on a credit report are good indicators of a person’s character. Consider the following examples:
-Jana has logged seven late payments and one charge-off on her credit report in the last two years. She is steadily employed but fails to pay her bills on time due to forgetfulness and general negligence.
An employer might consider Jana as a bad risk. How will her lateness manifest itself at work? Will she complete assignments on time? Take two-hour lunch breaks? Her credit report paints her as less-than-reliable.
-David has three credit cards, all of which are maxed out. His total consumer debt is more than $19,000, a sum that has taken a toll on his credit score.
David appears to have poor management skills. Allowing his credit utilization ratio to top out at 100 percent shows that he cannot manage his debt effectively. If he is hired for a senior role, how will he manage important projects and ensure quality work?
-Andrew filed for Chapter 7 bankruptcy in 2011. He owed more than $42,000 in consumer debt and $305,000 on a m
ortgage. Chapter 7 allowed him to liquidate his debts and start from scratch, repaying only a portion of his expenses.
Andrew seems untrustworthy. Despite signing contracts with his creditors, Andrew’s bankruptcy allowed him to bail on his commitments, leaving his creditors to suffer losses.
-Sonya’s credit report is virtually empty. At age 22, her only debt is $47,000 in student loans.
Sonya seems inexperienced and a bit naïve. Taking on nearly $50,000 in student loan debt probably wasn’t the best idea.
If these character judgments seem harsh, don’t put yourself in the same position. If an employer asks to run a credit check, stay ahead of the curve by putting your information into context. Consider our characters:
-Jana: “There’s really no excuse for any of those late payments. I’m not the best with money management but I have taken steps to fix the problem. My bills are now on auto-pay and I installed calendar reminders to double-check the balance. You’ll see that I’ve made dramatic improvements over the last six months.”
-David: “I went through a very expensive divorce last year, and to be honest, the legal fees took their toll. I hate credit card debt and I’m working hard to pay off my balances. I’m hoping this job will help me make a fresh start.”
-Andrew: “I got in over my head with a mortgage. I couldn’t afford to make ends meet and was forced to live on credit for about a year. It was a big mistake, one that I have definitely learned from.”
-Sonya: “I have three siblings and my parents couldn’t afford to send us all to college. I didn’t want to take out student loans, but I couldn’t afford to attend school any other way. I wasn’t willing to sacrifice my education.”
Allow an employer to make their decisions based on the full truth. Supply them with stellar references and work hard if your efforts pay off. Credit mistakes don’t need to control your life—make sure they don’t control your job, either.
