60% of companies don’t hire an employee with a low credit score: here’s what it means

It is increasingly common for businesses, especially in the financial industry, to perform a credit check on potential employees as a condition of hiring.

Bad credit can get you in trouble and prevent you from getting the job you want. The situation can be much more difficult if you have a history of bankruptcy.

A recent study by the Society for Human Resource Management (SHRM) showed that 60 percent of employers pull credit reports from current and potential employees. This is done to determine how financially stable you are.

Recently, employers, especially finance and software companies, have asked potential applicants to submit their CIBIL credit information report at the time of their interview.

With this in mind, a person should continue to check their report to ensure that the correct 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 numerical summary of your credit health. This score is obtained by the credit bureaus, by analyzing your credit history.

This is one of the determining factors for the approval of a loan or credit card application.

This score is affected by a series of factors such as payment and borrowing methods, number of credit card or loan applications, credit usage, etc.

The score typically ranges from 300 to 900 points and higher scores suggest more chances of getting your loans approved.

Scores above 700 are usually an indicator of good credit management. So, it goes without saying that the higher your number, the better you look to lenders and now employers.

Why getting a credit report is important

Getting a credit report is just as important as a credit score. It includes a person’s credit history with detailed information about their credit accounts and loans, bankruptcies and late payments, in addition to their personal information.
It is issued by approved credit information companies.

Credit scores are checked as part of the background check

Employers from different industries typically check credit scores or go through credit reports as part of the background check process before hiring potential candidates.

It has been observed over the years that many companies have started to focus on the financial health of an individual in order to assess 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 their finances, which is bound to have an impact on their performance at work.

3 ways credit scores are linked to employability

1

While there may be real reasons for a person’s bad credit or bad report, employers may perceive this as a sign of irresponsibility and inability to take care of things. Just as businesses and employers are wary of criminal records, an extremely bad credit report can have the same effect.

2

Additionally, employers may perceive someone with a bad credit history as dishonest and a potential threat to the workplace. While this remains questionable in other circles, from an employers’ point of view, they would much prefer to minimize the risk.

3

Finally, a bad credit report is indicative of a debt trap that most often affects people’s performance at work. Although this is not always the case, many employers see it this way.

How to make sure your credit score doesn’t hurt your employability

The best way to do this is to make sure that your credit history doesn’t reveal any negative credit history. To do this, there are some things to remember that can help you maintain control over your credit history, such as repayment history information.

The repayment history information (RHI) consists of existing and missed consumer credit payments that are included on your credit report.

In some cases, your RHI can be used by credit providers to assess your ability to afford a new loan or credit card. In other cases, employers may refer to your RHI in your credit report to assess your credit history.

In addition to this, applicants should be careful of any possible errors in their credit report, false information passed on to CIBIL – which could negatively impact the report.

By regularly checking your credit report, you can make sure that your credit reports stay positive and that good career opportunities are not missed.

– Article by Nipa Modi, Director, SecUR Credentials

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