That's a catch 22! Your credit is bad because you either can't get a job or you are under-employed. But you can't get a job because your credit is bad. Hey I get it, been there, done that.
But what really happens during the interview process? Well it is perfectly legal for an employer to check your credit but its not the same as when you are applying for a mortgage loan or getting a new credit card.
You see there are many different types of credit reports that you don't see behind the scenes. In fact you can have a different score for auto loans than for mortgage loans. But the big difference with employment checks is that there is NO score involved. And the big difference to you is that when an employer checks your credit it does not have any affect on your score. In other words you don't get a "hard" inquiry. So what your employer gets is just information including the following:
1. The name you used when you applied for credit
2. The address you used when you applied for credit
3. Your employment when you applied for credit
4. Inquiries-hard inquiries
5. Any public notices such as judgments, bankruptcies and tax liens as well as collections
6. Detailed account information like balance, type of loan (mortgage, credit card etc) and payment
7. Payment status (whether you are 30,60,90 days past due)
So yes your employer, if they request it, can get all the down and dirty details but not your score. Now here is how that can really hurt you.
1. Most employers don't know how to interpret a credit report (that's actually the good news)
2. If you get a goody two shoes interviewer who has led a perfect life, they might not understand how you are behind on your credit. After all it is your responsibility to save for a rainy day (their words, not mine)
3. If you have any kind of fiduciary responsibilities in your job then you will likely be highly scrutinized anyway. And rightfully so I might add. And I'm not saying that you shouldn't get the job, it's just that if someone was handling your money then wouldn't you want to know their financial situation? It is completely appropriate to examine your trustworthiness when it comes to money.
Here's what to do about it. As in everything else, check your credit and be prepared. Use www.annualcreditreport.comwhich will give you the best picture of what your prospective employer will see. This website allows you one, maybe two free reports (depends on the State) a year from each bureau and you need to check all three (you don't know which one your interviewer will get their report from). It will not give you a score without paying for (and don't because they are giving you a score that means little to you) it but you don't need one. You do need to be prepared to answer questions if someone brings it up. Although this is not a complete guide, here are some do's and don'ts when it comes to discussing your credit with a potential employer.
1. Do be honest always
2. Do make sure that your credit report matches what your application says (or be prepared to say why it is not accurate)
3. Do be prepared to take responsibility for your financial situation
4. Do be ready to explain lessons learned and how any financial issues have been resolved (or are in process)
5. Do be ready to explain why the future will be different
6. Do be ready to explain why this is a personal issue and would never affect an employment situation
7. Do give examples of how you have been responsible with money in employment situations in the past
8. Do be as honest as possible up front if you know the employer is going to review your credit
9. Don't be misleading or play the blame game
Remember that the only people with no problems are: dead people. So if the prospective employer expects perfection than you don't want to work with them anyway (unless you are perfect as well). Some of the most famous and wealthiest people in the country have dealt with financial disaster. So it's not that you have had problems (we all have) it's how you deal with it. That's how the interviewer will judge you.
Now, here's the really bad news. If you have read my book, Getting Past the Gatekeeper, then you understand already that if your interviewer actually does turn you down strictly because of your credit, they will likely not tell you. Why? Because it is easier to give you a general (you don't fit) answer than potentially be hit with a discrimination suit and have to send you a letter (required by law) stating that you were not hired because of your credit.
Honestly most of the time you will not ever be discounted just because of your credit. Most often an employer will use that as additional information to justify their other issues with you. But that's all the more reason to be prepared to answer questions and actually be pro-active about financial issues that you have had. That shows the interviewer that you will be proactive in your job as well.
Colin Daymude, Chief Employment Officer at The Job Genius specializes in teaching active job search strategies that dramatically reduce the time a candidate spends in the market. He does this by taking Human Resources and Recruiters out of the equation. Download the free e-book, Getting Past the Gatekeepers at www.thejobgenius.com
You can also contact Colin Daymude on Twitter, Facebook and Linkedin.
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