Credit report and scores: a bad credit report could cost you a job

Recently, I was at a 7-Eleven to buy a cup of coffee. I noticed the front page of a local newspaper with the headline “A bad credit report could cost you a job“.

I took the newspaper and began to read the article. He was talking about how, in order to get a good job these days, more and more employers are getting credit reports and analyzing the credit profile of their candidates.

This is a very serious situation. A person, especially in today’s economy, could have a bad credit report for any number of reasons, get laid off, have medical problems, or many other reasons, and now they can’t even get a job. It is truly a “chicken or egg” situation. The statistics shown in the newspaper referred to a survey conducted by the Society of Human Resources. They found that in 2009, 60 percent of employers performed credit checks, which was up from 42 percent compared to 2006. There was an increase of nearly 50 percent.

What would you do if you had bad credit and at the same time no one wanted to hire you because of your bad credit?

I personally think this is discrimination and there should be a lawsuit filed against employers for discriminating against people because of their credit report.

If the person is qualified to do the job and for some reason has bad credit, that should not be the deciding factor in hiring the employee. One possible option I see is that the employer can have a program for employees with bad credit and use financial education service companies and organizations to help them fix their bad credit.

There are good news. WA and HI have prohibited this practice and there is a bill pending in Congress that would prohibit the use of credit reports for hiring. However, there is an exception for people in the financial services industry and certain government jobs in the bill.

Being in the financial industry as a certified credit counselor, I would like to suggest some tips that can help people with bad credit and how they can establish a good credit rating.

Tip #1: Use your credit cards effectively: When you use your Credit Cards keep in mind that it is money that you owe someone. Credit card companies have allowed you to use their money so you can buy the things you want and need. However, when credit cards are used effectively, they can actually work in your favor. Most credit cards offer rewards programs when you use the card. To get the most rewards, the key is to pay off your credit card balance every month.

Tip #2: Use only 27 percent of your available credit limit: This is important. Any time your credit card balance goes above 27 percent, it can negatively affect your credit. So, for example, if you have a credit limit of $5,000.00, make sure you only use $1,400.00 maximum.

Tip #3: Never close any credit card: This is very important. The length of your credit history and the total available credit limit is an important factor in calculating your credit score. Every time you close an account, your available credit limit will be lowered, and if you’ve had this card for a long time, it’ll also erase the history you’ve established over all those years.

Tip #4: Pay all your bills on or before the due date: This factor alone accounts for 35% of your credit score calculation. This is what establishes your credibility which, as you know, is also very important in life. This is also reflected in his personal life. One of the reasons why more employers have begun to look at the credit report before hiring an employee is this, to see how the employee handles things in his life. If a person can handle things in life well, he will also be responsible at work.

Tip #5: Have a plan: If you currently have bad credit and don’t know where to start, I’ll share a simple and effective plan with you. First, if you don’t have a credit card, get one. A good number of credit cards to have is 2, plus a home mortgage and a car loan. There are two different types of credit cards you can start with, one is a secured credit card and the other is an unsecured credit card. Secured credit card is where a lender or bank will take a deposit for the amount and then issue you a credit card, usually for less than the deposit amount. Personally, I would only go to banks that give you a credit limit equal to the amount of your deposit.

The other way is to apply for a credit card that works with direct deposit from your employer. The way it works is when you have your salary deposited directly with the institution that will issue a credit card, instead of a debit card. Every time you use your credit card, even if money is withdrawn from your account, it is reflected as a credit transaction and is reported to the credit bureaus and reflected on your credit report. It’s a good way to start.

One important thing to remember, which is unfortunate, is that many businesses make money from people who can’t manage their finances well. Think about it, who pays more and at the same time earns or stays less. If you have bad credit, you will pay higher interest rates than people with excellent credit. When you suffer from bad credit, you may need to use the services of a company that can help you build your credit, you may need to file for bankruptcy, modify a loan, pay a higher interest rate on auto loans, insurance, mortgages interests, etc. You see where I’m headed; life will cost you more.

I hope that all this information has been useful and helpful to you at the same time.