By: April 24, 2018
Companies very often pull their prospective employee’s credit report to see how employable they are. What is a credit score and how can you ensure your career isn’t harmed?
It is becoming increasingly common for companies, especially in the financial industry, to run a credit check on prospective employees as a condition of hire.
A bad credit history may land you in trouble and might make it difficult for you to get the job you want. The situation can turn out to be a lot more challenging if you have a history of bankruptcy.
A recent study by the Society for Human Resource Management (SHRM) showed that 60 per cent of employers pull current and potential employees’ credit reports. This is done to determine how financially stable you are.
Recently, employers — especially from finance and software companies — have been asking prospective candidates to submit their Credit Information Report from CIBIL, at the time of their interview.
Keeping this in mind, an individual should keep checking his/her report to make sure that the right information is included in the report.
So what exactly is a credit score?
A credit score is a 3-digit number that shows you the numeric summary of your credit health. This score is obtained by Credit Bureaus, by analysing your credit history.
It is one of the determining factors for the approval of a loan or credit card application.
This score is affected by a range of factors such as payment and borrowing patterns, the number of credit card or loan applications, credit utilisation and more.
The score usually ranges from 300 to 900 points and higher scores suggest more chances of getting approval on your loans.
Scores that fall above 700 usually is an indicator of good credit management. Thus, needless to say, the higher your number, the better you look to lenders and now employers alike.
Why obtaining a credit report is important
Obtaining a credit report is equally as important the credit score. It includes a person’s credit history with detailed information of their credit accounts and loans, bankruptcies, and late payments, apart from their personal information.
It is issued by licensed Credit Information Companies.
Credit scores are checked as part of background verification
Employers across different sectors generally check credit scores or peruse credit reports as part of the background verification procedure before hiring potential candidates.
It has been observed over the years that many companies have started focusing on the financial health of an individual in order to evaluate several personal attributes such as reliability and honesty.
The logic is supposed to be that bad credit scores would imply that the person is bad at managing his finances which is bound to impact his performance at work.
3 WAYS CREDIT SCORES ARE RELATED TO EMPLOYABILITY
While there might be genuine reasons for a person’s bad credit score or report, employers can perceive this as a sign of being irresponsible and incapable of taking care of things. Just as how companies and employers are wary of criminal records, an extremely bad credit report can have the same effect.
Additionally, employers can perceive a person with a bad credit report as dishonest and a potential threat to the workplace. While it is still debatable in other circles, from the employers’ point of view, they would much rather minimize the risk.
Lastly, a bad credit report is indicative of a debt trap which more often than not affects people’s performance at work. Even if it might not always be the case, many employers see it as thus.
The best way forward is ensuring that your credit history does not reveal any negative credit history. For this, there are certain things to remember that can help you keep a check on your credit history like Repayment History Information.
Repayment History Information (RHI) consists of existing and missed consumer credit payments that are included in your credit report.
In some instances, your RHI may be used by credit providers in assessing your capacity to afford a new loan or credit card. In other instances, employers may refer to your RHI in your credit report to gauge your credit history.
In addition to this, candidates must watch out for any possible error in their credit report, false information passed to CIBIL – which could reflect negatively on the report.
By habitually checking your credit report, you can ensure that your credit reports remain positive and the right career opportunities don’t pass you by.