It’s been months of job hunting, and unsuccessful job applications for Biodun. This afternoon while she refreshes her mailbox for the hundredth time, an email and text notification for a job interview drops on her phone. And of course she’s excited. This is an interview she has been expecting for several months. On the day of the interview she dresses to the nines, as prepared as she could be and ready to answer any question she would have to answer. After a rigorous interview of 3 stages, she finally gets the job offer, but there is one last check - Biodun’s credit report.
But why do employers care about your credit report at all? Simply put, certain aspects of the report can be indicative of habits or behaviors they don’t want in the workplace. For example, if you have several delinquent credit accounts, that may signal you’re unorganized or don’t keep your word. If you have excessive debt or several credit cards with high balances, it can suggest you’re desperate and might be more likely to steal from or defraud the company.This may sound like the company is judging you without getting to know you, but it’s not cheap to hire and onboard a new employee. Employers must try to mitigate their risks as much as possible.
An employment credit check is a report of your borrowing history potential employers can use to help make hiring decisions. In most cases, companies who perform credit checks on potential employees do so just before making a job offer or after making a conditional job offer.
It's unusual for businesses to conduct credit checks on every single applicant since the process takes time and costs money. In most cases, nearly all the information included in the credit check relates to personal credit and debt. Some employers believe understanding how an individual handles their own money provides insight into how the candidate will perform on the job.
For security purposes, the credit report can be used to verify someone’s identity, background and education, to prevent theft or embezzlement and to see the candidate’s previous employers (especially if there is missing employment experience on a resume). For employers, it is a big picture snapshot of how a potential candidate handles their responsibilities.
If an employer is running a credit check on you, it is most likely only after they already made a decision to hire you, and it is usually the last thing they check. Since pulling credit checks costs employers both time and money (many outsource to a third-party company), credit checks aren’t necessarily used to weed out a big pool of potential applicants and not all applicants will have their credit checked.
Employers are more likely to run a credit check for candidates applying for financial roles within a company or any position that requires handling of money (such as accountants or retail roles).
How can you prepare for a credit check?
Checking your own credit proactively lets you see what an employer would — and potentially fix any erroneous negative marks in advance.
Once you’ve done that, keeping your credit report in good condition is a smart financial move — and it will protect your credit score, too. Here’s how:
Maxing out credit cards is bad sign. Paying down loans or paying them off is generally seen as a good thing. Credit card lenders may assess overcharge fees, decrease your credit limit or even close your account if you go over your limit habitually. Lenders may also increase your interest rate if your credit history shows that you regularly exceed your credit limit, and your credit score may be negatively affected. So know your limit—and always keep track of how much you have charged.
If you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed negatively. For example, lenders may think you’re a greater risk if you apply for 6 new credit cards in a year. There are some exceptions, like when you’re shopping around for car loans from multiple banks.
The sooner you’re aware of something affecting your credit, the sooner you can address it. Start by reviewing your credit report thoroughly. Look for any information that is incorrect, such as paid debts that are listed as delinquent or accounts that you never opened. You can dispute these errors directly with CreditRegistry, Nigeria’s Largest credit bureau. Removing negative information is just one part of the process. You should also add positive information by improving as many areas of your SMARTScore as you can. The truth is, there are many factors impacting credit that you can tackle with awareness, self-discipline and personal responsibility. Ultimately, being responsible with credit means living within your means, regardless of the level of those means. So, take a close look at your financial situation, evaluate your earning and spending habits, and make the necessary adjustments to put yourself on responsible financial footing