Myth No. 1: Most employers pull a credit report. The 2010 Society for Human Resource Management report, “Background Checking: The Implications of Credit Background Checks on Hiring Decisions,” found that only 13 percent of organizations conduct credit checks on all candidates.
Usually there has to be a reason, such as the job is in finance, or an executive level job with profit and loss responsibility.
Truth: Few do, and usually for specific reasons.
Myth No. 2: Employers and lenders look for the same information.
While lenders place strong emphasis on credit reports, it’s only a small part of an employer’s holistic evaluation. Your credit report could be a show-stopper, though, when what’s on it causes doubt about your ability to handle and manage corporate assets, such as debt that went into collections or litigation.
And unlike lenders, employers don’t check credit scores, but they may access a comprehensive background report. Along with your credit history, that lists data such as your past employment, payment history and legal activity. You’re entitled to one of these reports free per year, so if you’re job hunting, pull the reports.
The Human Resource Management report found that most organizations focus on credit history of four to seven years overall. Consequently, even if you’ve improved your credit lately, you may still have to explain indiscretions from bygone years to the person making hiring decisions.
Truth: Employers take a longer view on your credit past.
Myth No. 3: Employers use credit checks to discriminate.
According to Smith-Valentine, a driving force behind credit checks is litigation protection. “If an employee does something allegedly wrong and they get sued, the attorney will get their file,” says Smith-Valentine. “If the company did not do an appropriate background check, they can use it at trial.”
Indeed, Smith-Valentine’s claims are confirmed by the Human Resource Management report: companies conduct credit background checks most often to offset theft and embezzlement, and after that to reduce liability for negligent hiring.
Be aware though, that in the future, companies may even be prohibited from accessing your report at all if a bill currently in Congress — the Equal Employment For All Act — becomes law. The bill would amend the Fair Credit Reporting Act to limit employers’ ability to check credit reports and to use them against prospective and current employees.
Truth: Employers pull reports to protect themselves.
Myth No. 4: All negative information is bad. Truth: Some is more alarming than others.
While a lender may balk at a skipped credit card payment, the Human Resource Management report found that employers are most negative about you being sued for a debt and that results in a monetary judgment (a concern because there could be wage garnishments they would have to deal with) Next worst? Not paying your bills and having them land in collection.
Large, outstanding balances can be adverse too. If their monthly payments are too big, that’s a sign of financial duress and a risk factor for committing financial exploitation.
Truth: Some credit report information is more alarming than others.
Myth No. 5: Employers don’t care about your reasons for having bad credit.
Prior to your credit report being checked (and you’ll know, as you have to give permission), disclose problems quickly. Eighty-seven percent of organizations report that they allow job candidates, in certain circumstances, the chance to explain results, according to the Human Resource Management study.
Sometimes unfortunate things happen to good people. Give give a plausible explanation about why this derogatory information should not be a cause for concern.
Truth: They care a lot.
Finally, if you have fabulous credit and are counting on it giving you an edge, forget about it. A mere 9 percent of recruiters said that a positive credit background check is an influential factor in hiring decisions. It’s nice, but the candidate with the firmer handshake and superior credentials will probably join the payroll.
Source – Erica Sandberg – San Fransico Chronicle
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