It’s no mystery that a bad credit rating can make life difficult when you’re applying for a mortgage or a loan. However, if your credit score is less than perfect could there be other implications too? Although employers have to be careful when searching employee personal information and making decisions on the basis of that, credit data is very easy to obtain. So, if you have financial difficulties in your credit history it’s natural to be concerned about whether this might impact on a current or future role.
When does your credit rating crop up?
Firstly, it’s important to state that in almost every case an employer would need to have the permission of an employee – or candidate – to check their credit rating. Given the effort and admin involved, most employers won’t go to the trouble of carrying out random credit checks on employees to ensure that they’re still doing well so it doesn’t happen often. However, there are certain stages in your career when you could find yourself signing a consent form for a credit check.
With a job application. Many employers now request the approval of an applicant to carry out a credit check when they receive an application for a position. Not every employer will do this and each has their own set of criteria against which to judge whether the candidate is suitable.
Promotions. Some businesses will also review the credit status of an employee just prior to a promotion or offering a new role.
Lateral hires. If you’re being recruited into a business via a lateral hiring process then this is usually at a more senior level and so you can expect more in-depth checks. Whether this involves looking at your credit status will depend on the role in question and the company.
Identity checks. Some employers may use the information in a credit score to check or establish identity.
Why do businesses check employee credit ratings?
There’s a lot at stake for an employer taking on a new member or staff – or promoting them. For many businesses it has simply become a habit to gather as much information as possible on the potential new hire. This provides a more accurate picture of who is being taken on and how they operate as an individual. Other businesses need to carry out a credit check due to the nature of the work involved. So, for example, applications for an accountancy position or a job working with cash in a bank are more likely to require a credit check. If you’re applying for a financial adviser type role then the way you handle your own money might have an impact on whether you’re suitable for the job.
What are the employment consequences of a bad credit rating?
If you have given a potential employer permission to look at your credit rating and it doesn’t match their criteria then you may not make it through to the next stage. This is never a forgone conclusion and will always depend on the job, the employer and the rest of your application. When it comes to losing your job as a result of a poor credit rating, it is less black and white. Employers have to be careful when firing employees and so usually only do so if there is a good reason. If, for example, a good credit rating could be considered essential for the job then a poor rating might be a sound reason to fire someone. Most employers won’t simply hand out a P45 to an existing employee who hasn’t done anything else to warrant being dismissed. Plus, they won’t look at the entire credit report just the information they need to make their decision. So, if you don’t have a great credit rating and your employer has requested permission to check, it’s worth opening a channel of communication about it before any decisions are made.
What can you do about a poor credit rating?
There are lots of ways to improve your credit rating so that you don’t have to be so concerned about employer checks in future:
- Clear some debt – even reducing your debts by a small amount will improve your credit score.
- Make sure there are no mistakes on your report – mistakes can damage a credit score and you can ask to have these removed or fixed by adding a notice of correction.
- Don’t make multiple credit applications – if you’re not accepted for the first one then wait a while or your score could go down.
- Make sure you’re on the electoral roll – if you’re not this will damage your credit score.
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