Stuart Gentle Publisher at Onrec

Does Your Credit Rating Impact Your Job Prospects?

Your credit rating is fairly important when it comes to financial management.

A bad credit rating will motivate lenders to reject your loan applications, leading them to assume that you won’t pay them back. And even when you can get a loan to rent housing or buy a car, you’ll be charged more interest to offset the risk of you defaulting. But those aren’t the only relevant areas.

You may never have heard about it, but your credit rating can actually have an impact on your job prospects. It isn’t always an issue, of course, yet it’s something you shouldn’t overlook if you’re having difficulty finding work and want to rule out as many causes as you can. In this post, we’re going to expand upon why your credit score matters when it comes to potential employers, and offer some tips for how you can work on it. Let’s get started.

Why do employers want to check your credit rating?

There are two main reasons why prospective employers sometimes want to check the credit ratings of their potential hires:

  • The roles are financial in nature. If you’re set upon a career path that involves financial management, your personal finances will understandably be of interest to your prospective employers. Someone who claims to be excellent at balancing accounts to avoid debt but has a terrible credit rating will obviously be highly questionable.
  • They want to gauge responsibility. It’s something of an overreach, but it’s not unknown for companies that want to hire people who are generally diligent and responsible to check their credit ratings. Those with good credit ratings can more easily be trusted to be professional at all times and look after themselves.

The reasoning isn’t always good, but remember that job candidates represent possible investments for employers, and investments need to be chosen extremely carefully.

Do they need your permission to proceed?

This depends on what type of check is desired, as there are two varieties. There are soft credit checks which check your credit report, gleaning the same information you can see when you check your credit. These checks don’t mean much and omit your credit scores plus any information that could be used against you unlawfully, such as your marital status or birth date.

Though they probably should, businesses aren’t technically required to get your permission before carrying out soft credit checks. Thankfully, those checks won’t significantly affect your credit rating: you may even see hundreds of them build up from potential lenders eager to get in touch with you so they can try to lend you more money.

More significantly, there are hard credit checks that really dig into your details including your credit rating. These do require your permission to take place, so they stay on your credit record for quite some time, and getting many of them quite quickly will be viewed as a sign that you’re desperate and managing your money poorly, leading to a decline in your credit rating.

You can review both check types on your account, and request to have unauthorized checks removed if prospective employers (or lenders) have somehow carried out hard checks without your permission (these checks can stay on your account for two years otherwise).

What if you don’t have a credit rating?

You might think to avoid the problem of bad credit by never building up a credit rating at all, but this isn’t an effective solution in most cases. The point is to demonstrate that you can borrow money and pay it back promptly, and never borrowing any money proves little. Due to this, the smart thing to do is apply for credit card services from a reputable provider.

Note that cards from many smaller credit brokers are ultimately issued and funded by bigger companies (credit cards from The Post Office, for instance, are backed by Capital One), meaning that you don’t have to go with the biggest provider you can find if you’d rather go elsewhere. And once you have your card, you don’t need to use it to borrow heavily. Just go into your credit when you already have the money to pay it, then pay it back extremely quickly. Soon enough you’ll have a positive credit rating, with no real risk of encountering problems.

How can you deal with a weak credit rating?

So what if you already have a credit rating and it isn’t very good? Maybe you handled your finances poorly before, or maybe you just ran into financial problems. Either way, you’re stuck worrying if your prospective employers are ruling you out as a candidate because of your messy financial situation. There are two things you can do in this situation:

  • Provide a good reason for your credit situation. A bad credit rating isn’t always a sign that you don’t know how to manage your finances. Sometimes it’s the simple result of extreme misfortune. If there are extenuating circumstances, let your prospective employers know about them, and they may well put less stock in your rating.
  • Work on making it better for future opportunities. It’s simple enough to improve your credit rating, though not necessarily easy: just use credit and pay it back promptly. When you can’t afford to do that, avoid using credit altogether. Just a few simple changes can improve your rating in a matter of months.

Wrapping up, then, most prospective employers won’t bother looking into your credit situation, but it can happen if you’re looking for a job in the financial industry (or come across a particularly discerning company). This is just one more reason why you should be keeping your credit rating in good condition.