Many, if not most, employers now include credit checks as part of the hiring process. In fact, some studies suggest that up to 60% of employers check some or all of their job applicants’ credit reports.
The logic behind asking for prospective employees’ credit histories is simple: job seekers who are responsible with their personal finances will likely be responsible with their work – and with company finances.
For people who have struggled with their finances (and, surprisingly or not, that’s most Americans), granting a potential employer access to your credit may be cause for concern. But in reality, a blemish on your credit report doesn’t have to mean a lost job opportunity. With the right strategy in place, you can navigate this part of the recruitment process and land a job – even if your financial history is less than ideal.
Not all employers request credit reports
Even though it’s relatively common for employers run credit checks on their applicants, many job seekers will not be asked about their financial history. Typically, those who are asked in-depth questions about finances are those who will be responsible for company finances, such as:
- C-level executives
- Store and branch managers
- Mid-level managers who will be trained for higher positions
- Accountants or financial managers
- Anyone who will be expected to regularly make expensed purchases
Unless you are applying for one of these positions or a similar job, you have little reason to worry. But if you are applying for a job that includes managing company finances, here are some ways to handle the credit aspect of your interview process.
Be honest and upfront
Trying to hide a negative incident that is on your credit report will only hurt your prospects of landing a job. If you are asked about your credit history, be honest and upfront about what an employer will find on your report. Discussing it in person, without trying to hide or sugarcoat anything, shows character, which is a trait every employer desires.
Most employers do not request a credit report until well into the interview process; the request is often a sign that you are seriously being considered for the position. Contact the hiring manager or recruiter who has been helping you through the interview process, and explain what is on your credit report. Avoid long-winded excuses, but be thorough in your explanation.
Focus on your report, not your score
Unlike financial institutions, employers do not receive your credit score. They only see your credit report. These are often sold together, but they are actually different products in the credit-reporting industry. Employers will only see accounts and incidents, not the number that represents a “grade” of your financial responsibility.
Therefore, when you speak to your potential employer, you should focus on the incidents, not the score. Your credit limits, credit lines and amount of debt you carry all factor into your credit score. But as far as applying for jobs is concerned, there is little reason to worry about all of this. Employers are interested in whether you’re paying bills on time – not how much debt you have or who holds your credit lines. If you are in credit card debt, be sure to explain your budget and strategy to pay off those bills.
Explain the big incidents
Your credit report will mention any delinquency you may have had, but employers are most interested in the big events. Any bankruptcy, foreclosure or evictions will hurt your job search much more than that lone bill that went unpaid while you were on vacation. Your best tactic for handling an issue like this is explaining it and hoping your potential employer gives you the benefit of the doubt.
If you have a big issue that needs to be addressed, you are permitted a 100-word amendment to your credit report. Write up a brief statement that mentions what led to the bankruptcy, foreclosure or eviction, how you addressed it and what you are doing differently now. This will not help you secure loans from banks, but employers do pay attention to these statements.
Plan for the future
The best thing you can do to assure future employers that you can be responsible with their finances? Show them that you’re taking steps to be responsible with yours. If you can prove that you’re taking serious measures to improve your credit and your finances, it will go a long way toward convincing your potential employer that you’re accountable and trustworthy with money.
When speaking with your potential employer, lay out your plan for paying off loans or credit card debt and improving your credit report, and discuss your strategies for saving and managing money. You could even earn an employer’s respect by proactively using tools like SmartyPig to help you save money toward your goals or start building a financial safety net.
About now…it gets especially hard for me to stick to my well-planned holiday budget. Why? Well, I’m feeling all cheery and thoughtful, and certainly want everyone in my life to feel the same — so I buy an extra gift for the kids, and then pajamas for all, and more holiday decor and then pajamas for the Elf on the Shelf. Wait. This is getting really out of hand.
You can still be thoughtful and not blow your budget to pieces. If you’re feeling generous, spend time baking a treat for friends and family. Or take extra care in creative wrapping of your gifts. When buying gifts, plan ahead and stick to your outline. If you overextend, don’t start your downward spiral, simply cut back elsewhere (if you can) or move on, and don’t make it a habit. The bottom line is, this is the time to show those in your life how much they mean to you — but, it doesn’t have to cost you to do so. Get creative with your feelings things year and save some money while you’re at it!
Wishing you successful saving. And Happy Holidays!
Sarah Foss, SmartyPig’s Media Mad Woman, SFoss@SmartyPig.com
Holiday gift-giving experts suggest giving the gift of an investment or savings account this holiday season. The amount you spend is up to you, and you can tailor the gift exactly as you wish. So contribute to your friend’s and family member’s SmartyPig goal this holiday season. Or if they don’t have a SmartyPig account, help them get started with a SmartyPig gift card. You’ll give them the gift of savings, while they earn an industry leading 1 % interest rate and receive up to 11% cash back when they reach their goal.
SmartyPig gift cards are available in $25, $50, $100 and $500 denominations. They can be given to both current SmartyPig account holders as well as individuals to whom you would like to give the gift of savings.
No longer are these “oh crap” expenses that sneak up on you. We can now auto “pay” for these just like any other monthly bill and don’t need to fret when the time comes to take care of them. – Brian
I use SmartyPig to help save for and pay my auto insurance. It comes due twice a year, and I know what the amount is, but getting hit with several hundred dollars is hard to swallow if not expecting the bill. Thanks SmartyPig – Molly
When it comes to the holidays, you may as well tack on a 10% tinsel tax to just about everything you do and buy. Why’s that you say? Well, the extra money you spend on lighting your home, the shipping charges you pay at the last minute (oops), and the festive tips to your favorite babysitter and nail technician…are just a few examples. Like the saying, “everything is bigger in Texas” – everything is bigger during the holidays.
The queen of giving herself, Oprah, notes “10 Hidden Holiday Costs to Watch Out For,” and it’s an article you won’t want to miss. Some of my favorites include; shipping costs, holiday cards (and postage!) and the cost of scrambling for a last minute gift. I have a few budget breakers that get me most years like hostess gifts. Instead, I buy wine in bulk from retailers like Trader Joes and save a bundle. Also, wrapping paper, bows and cards really add up. I find dollar store butcher paper and crayons can make for some fun packaging – and simultaneously, a entertaining indoor craft for the little ones.
These small amounts can add up in a big way, and I’ll bet a good white elephant gift that most of you have had a fat January credit card bill at one time or another. DON’T let that happen this year. Start with smart spending this month, and again, smart saving on January first.
Happy holiday budgeting!
Sarah Foss, SmartyPig’s Media Mad Woman, SFoss@SmartyPig.com