Think your credit problems won’t affect you in the workplace? Think again!
Increasingly, employers are conducting credit checks as a standard part of the hiring and promotion process at many companies nationwide. This number has gone up tremendously since the end of 2009.
Years ago this practice was only limited to jobs on Wall Street, or in financial institutions where a person was responsible for handling money. These days, thousands of companies are making credit checks a standard new-hire procedure, just like criminal background checks, regardless of the type of position.
Blame it on the economy. Blame it on the mortgage and financial crisis! You can even blame it on your parents if you like. It doesn’t matter. What’s important is that this way of hiring people is becoming the standard way of doing business for many human resource departments. And with so many people losing jobs and becoming unemployed, protecting your credit is more important today than ever before, if you expect to be able to find employment once the economy turns around.
After nine years of working in the financial sector, here’s what I’m starting to notice become commonplace across most industries:
When it comes to hiring and promoting employees, companies are starting to believe the way you handle your finances and credit is a direct reflection of your behavior in other areas of your life.
If you regularly pay your bills late, they believe you are much more likely to be constantly late for work. If you’re behind on bills, you’re more likely to steal from the company. Although not necessarily true, in 2010 this is becoming the standard way of thinking in companies across America.
Even if there’s a reasonable explanation for your past credit problems, companies consider bad credit as a distraction and feel it takes away from worker productivity.
Recent research shows that employees with bad credit are significantly less productive on the job than those who have their finances together. With so many people expected to be out of work and seeking employment in 2010, its way too easy for a company to not even bother risking hiring a person with bad credit when they can easily hire someone else with good credit. Especially in a market like this, where every time companies need to fill a position, they get thousands of people applying for it.
Companies use this same ‘drop and run’ process when running background checks. Try admitting on an application that you have a felony criminal record and see how fast your resume gets trashed. It doesn’t matter how much you might have turned your life around. Companies aren’t willing to take a risk. There are way too many other applicants who have a clean record.
They could care less about why you had problems in the past. They don’t care about the details. The same happens with all these companies who now run credit on new job applicants.
Don’t say you haven’t been warned.
Under the Fair Credit Reporting Act, a prospective employer must get your signed permission to conduct a credit check. For them, that process is easy. Once they hire you, you’ll usually see a piece of paper that needs to be signed, along with all the other new-hire paperwork you get after starting any new job. The paperwork will usually say you have to give them the authorization to run your credit, as a condition of employment. Usually they won’t even tell you in the beginning that your credit is going to be considered as a condition of employment. You won’t find this out until after you’ve gone through the entire hiring process.
According to the Federal Trade Commission, this procedure of running an applicant’s credit is totally legal and is increasingly becoming used as a prescreening tool.
If a company decides to fire you because of your credit, they are required to provide the reasons why and provide you with a copy of the credit report and a disclosure of your rights under the Fair Credit Reporting Act. That might be nice, but what good is that after you’ve been terminated?
With this practice becoming more common in 2010 and beyond, I would highly recommend if you’re out there looking for a job or plan on getting a promotion, be sure to keep your credit scores high and resolve any credit related problems you might have. Today’s job market is much too competitive to miss out on an opportunity or end up getting fired because you’re sitting there with bad credit and haven’t done anything about it.