Some of you might come across an employer who requests a credit check as a condition of employment. This is a common practice and the rules are laid out as a part of the Fair Credit Reporting Act. Generally, the standard often requires that a credit check can only be done if it pertains to the nature of the job you are applying for. In other words, you can expect a credit check to be run by any financial institution including banks, accounting firms, and finance companies. It is important to know what this means for you and what you can do to avoid a credit issue as a college student. Here are some steps to avoid credit checks as a barrier to employment:
Start paying off your credit card debt early
Generally, a bad credit score isn’t enough to bar employment, but if you have a lot of outstanding debt and have been missing payments, it is important to get caught back up. Often times, just saving enough money can give you some leverage to settle the debt in a smaller lump sum. Try talking to the financial institution’s credit department to see what your options are. Often times they might accept a smaller lump sum rather than expect you to make monthly micro payments. This might be because it has a more positive effect on the company’s short-term allowance for doubtful accounts and aggregately improve their collection on accounts receivable for the year. You can think of it as a mutually beneficial arrangement for both you and the credit card company.
Pay off any outstanding small claims against you
This one might not pertain to a lot of people, but from my experience as a college student, I have personally experienced (as well as known of others) who have had landlord disputes and end up with a court ordered small claims, whether for a roommate missing rent or for damages caused to the property. It is important that you pay these types of debt immediately or a judgment can be placed on your credit that stays for up to ten years. While it is true that debtors prison no longer exists in our country, a judgment mark on your credit can have detrimental effects including the inability to rent for some households, barriers to entry for certain jobs, garnished wages, or being unable to mortgage a house.
Check your credit score for discrepancies
A lot of people don’t realize that they can request reports of their own credit score. If you are curious to see if there is any issues with the debt you owe, the best way to figure it out is to initially look at your own report. As I said earlier, a bad score isn’t enough to bar you from employment, but in some cases, students lose track of where they are standing with their debt, so if there are any judgments or claims against you, they would appear in the report.
Don’t make the mistake in assuming that you might be going into a field of work that won’t require a credit check, in today’s society, credit checks are becoming more and more of a common occurrence. In fact, many employers rely on credit checks more so than they do traditional background checks, especially for financial institutions. This is because there is a correlation between an employee’s debt history and the likelihood that they will steal from the company. I have known people who were turned away from a job simply because of an outstanding debt that is from years in the past and it’s not a good experience. You should also always ask for a copy of the report after applying for a position, especially in the event that you might have to claim an unfair treatment act. Employers are not allowed to ban you under the premise of a credit check unless there are explicit discrepancies (usually need to be a legal claim of debt on your history).
Hopefully this helps answer some questions you may or may not have had about employer credit checks and are prepared for the likely event that you will go through one.