When you think of being rejected due to bad credit, you probably think in terms of not being able to buy a new car or even purchase your first home. However, more recent trends indicate that you may get rejected by a potential employer, or even by someone that you are dating, due to bad credit. But don’t worry, you can turn your credit situation around. We are going to walk you through the process of what to do if you are rejected because of bad credit.
This post is sponsored by CreditRepair.com. All opinions are mine alone and are honestly conveyed.
You probably knew that having bad credit would affect your finances and ability to open a new credit card or obtain a loan from the bank for a new home. What you may not realize is that your credit can actually affect other important areas of your life.
Can you be denied a job because of bad credit?
Believe it or not, the answer is yes. You can be denied a job because of bad credit. Depending on the type of job that you are applying for, your potential employer may request a credit check. Keep in mind, that they must have your authorization to check your credit, so you will be informed up-front if this is a part of the interview process.
Why might a future employer need to do an employment credit check?
If the job that you are applying for requires you to have access to either the company’s financial information or private client information, a company may choose to have candidates submit to a credit check.
So what is a potential employer actually looking for when they check your credit? Employers are actually checking for a couple of major things: responsibility level and/or an inclination to commit fraud.
- Responsibility—your credit report can show quite a bit about how responsible you are in regards to your own finances. A future employer is able to determine if you make your payments on-time and manage your own level of debt effectively, or if you have run up a lot of debt and are behind on payments or maybe even have collection accounts due to bad debt. If an employer sees someone who does not manage their own personal finances effectively, it may be an indicator that they will not manage the company’s resources efficiently and with care.
- Inclination to commit fraud—of course, there is no exact marker on a credit report that can indicate whether or not a candidate may commit fraud or not. Obviously, this is a much deeper virtue that is realized within a person’s consciousness. However, if a candidate has a lot of debt or is behind on making their payments, then the temptation may be present for that person to utilize the company’s or clients’ financial information in a fraudulent way. What a company is really trying to analyze with this is not if a potential employer will commit a fraud, but if the motive exists to potentially do so.
Explain why your credit is bad
If your potential employer asks for a credit check and you know that you have bad credit due to late payments or collection accounts, give your employer an explanation. If you recently went through a divorce, were off work due to an accident, or incurred major medical expenses, it might make a difference to your employer. Your credit report only shows the payment history and amount of debt that you have, but it doesn’t indicate the why. Letting them know that you are aware of your financial situation and are working to resolve it, is also an indicator of the type of employee that you will be.
Is credit score important to a future mate?
The answer is yes! A recent study by Bankrate.com indicated that 42 percent of Americans indicated that knowing someone’s credit score could be a deciding factor when dating. While it may not be imperative to discuss on your first date, knowing someone’s attitude towards money, and how they spend and save it, can also be an indicator of compatibility. While the credit scores themselves might not be the deciding factor in a potential mate, being on the same page when it comes to finances is very important to the long term success of the relationship.
Related article: Money Advice to Improve Your Relationship
“Money is the No. 1 stressor in most people’s lives. Being honest and transparent about money is important.”—Maggie Baker, financial therapist and author of Crazy About Money
Related aricle: When NOT to talk to Your Spouse About Finances
How to fix your credit
If you have bad credit now, it doesn’t have to be a permanent part of your financial future. So whether it has affected your ability to qualify for a loan, obtain a new job, or even been an issue in a personal relationship, there are several things that you can do to improve your credit immediately:
- Review your credit report for inaccuracies—if old accounts or collections are showing up on your credit report, work to get them updated and cleared off. You can work to do this on your own by working directly with the creditor or the collection agency, however, it can be difficult to navigate on your own, so you may need the help of credit repair professionals.
- Commit to making payments on time—creating a history of on time payments will create a solid credit record and increase your score. Making payments in a timely manner is an indicator or not only the ability to repay your debt, but a willingness to do so.
- Pay down your debt—if you have several open accounts with balances, try to pay those accounts down to less than 50 percent of the credit line. For instance, if you have a credit card with a credit line of $5000, make sure that you are carrying a balance of $2500 or less on that card. If possible, try to pay off some of your open accounts. Having an account marked as “paid in full” indicates to the credit bureaus that you successfully completed your debt obligation.