Can your employment get affected by your credit score?

Your credit score is one of the important things that serve as a benchmark to know your financial well-being. Almost every financial institution and even your employer use this tool to gauge your credit repaying discipline before lending or hiring you. So, a bad credit score can serve as a reason behind the rejection of candidates.

What Is a Credit Score And Why Is It Important For Job Applicants?

A Credit Score is a 3-digit number that shows your creditworthiness. Through a credit score, your lender determines how responsibly a job applicant is managing their finances.

It is generally recommended to check your credit report and score regularly to maintain a healthy credit rating. If you find any errors or discrepancy in your report, you must immediately contact your lender or credit bureau to get the mistakes rectified. It will boost your chances of getting employed.

Why Do Employers Check Your Credit Report?

Below are the reasons for which your organisation checks your credit report-

  1. To keep an eye on the reckless nature of the candidate:

    Organisations check your credit report to know your repayment behaviour during the past. If they find you struggling in meeting the debt obligations on time, it will reflect your reckless nature towards making payment. It will also lessen up your employment prospects

  2. To evaluate your trustworthiness:

    If an organisation asks for your credit report and find that you have a good credit rating, they may consider you trustworthy. It Indicates integrity and shows that you’re willing to pay your dues on time and trying to maintain a good relationship with your bank. If you have a good score, it creates a good impression in the mind of your employer which further boost up your chances of employment.

  3. To find out risky financial condition:

    Your good credit score can accelerate your job search. Conversely, a poor score can decrease your chances. When there is an inconsistent repayment history, a huge number of delinquent accounts and open accounts along with high monthly payments, the HR personnel may seem this as risky. If you are applying for a position where you may be in charge of company funds like accounting tasks and company funds, the risk of money laundering cannot be completely eradicated.

What Employers Look For In A Credit Report?

There are certain aspects in your CIR (including your credit score) that are important to check according to potential employers. The credit report and score are indicators of your ability to repay credit and loans.

These are the major factors in a credit report which employers are more focused on:

  • Repayment History

    It consists of 35% of your credit score. Even a single delay in making the payment can result in a drastic change to your score that will bring down your overall credit ranking. Hence, it is most important to repay your credit card bills and loan payments on time.

  • Credit Utilization Ratio:

    It accounts for 30% of your score. Ideally, you should use only 30% of the credit limit to maintain a high score.

  • Credit History Length

    It makes for around 15% of your score. A borrower with longer credit history, along with timely repayments on it, will have a higher score.

  • Frequent Borrowings

    This section also makes for around 10% of your credit rating. Borrowing too much and too frequently, along with outstanding debt will adversely affect your score. It is most important to inculcate a disciplined approach when it comes to using credit cards and making repayments.

  • Credit Mix –

    Credit mix refers to the types of accounts you have borrowed till date. It consists of 10% of your score. The different types of credit that might be a part of an individual’s credit mix include secured and unsecured loans.

How to Ensure A Good Credit Score Before Seeking Employment?

Below given are certain steps that you can take to boost your score before seeking employment.

Check your Credit score and report regularly

You need to review your report and score consistently before seeking employment. Doing this will help you to remove the errors from your report which might be lowering your credit rating.

Regulate borrowing

Ensure that your borrowings do not exceed your income and ability to repay the amount on time to maintain a good credit score.

Start Repaying on Time

Paying all your outstanding dues on time will reflect you as a good borrower who is disciplined in making the payments on time. It will also help you to boost your score as well. In a nutshell, it is important to keep your credit score always on top. You can easily maintain a healthy score by checking it regularly and removing off the errors from your report. It will surely help you to boost your chances of getting employed.