The number of Americans with a weaker credit score continues to rise. High unemployment, foreclosures and a bad economy is leading to more bankruptcies and other credit problems; unfortunately, more employers are requiring routine credit checks as part of their routine hiring processes.
Imagine losing your job and beginning the process of securing a new position, only to discover a tough job market. Then, when you finally snag an interview, you learn you must sign a consent form that allows that potential employer to run a routine credit check. You’ve been unemployed for weeks or maybe months, so you know your credit history has taken a big hit. What do you do? That’s what has million of Americans concerned as they set out to redefine their careers.
The Vicious Cycle
It’s happening everywhere in the country. Job layoffs, company closings and other work-related disasters are adding up to millions of Americans looking for a new way to earn their income. They’re polishing their resumes and sending each one with a hope that it’s the one that lands that new position that will allow them to maintain their families and households.
The competition is fierce, after all, the unemployment rate is still higher than 9% and in some states, that percentage is in the double digits. You finally land an interview. It goes perfectly, you know you’ve made a strong impression and then, as you’re standing up and preparing to shake the interviewer’s hand, she says,
Oh, by the way, as part of our hiring process, we’re now conducting credit checks. I’ll need you to sign this waiver.
Suddenly, the air in the room is heavy with fear. No matter how strong your credit history is, being unemployed all this time has resulted in a few late payments, missed payments or for many, a foreclosure or bankruptcy. You know you’d have kept up the payments if you could, but without a job, it was a struggle. Now, you learn that the one thing that will allow you to rebuild might be jeopardized because of the same thing that’s led to a weaker credit score: a job.
Currently, there are around 16 states that are working to ban the use of credit checks as part of an applicant’s selection process. Approximately 47% of all companies in the U.S. use this as part of its hiring process, compared to only 40% who ran credit checks on “some” applicants in 2006. Clearly, the trend is catching on. That’s one of the reasons states are growing more concerned. If the employers in these states are allowing a credit history to play a role in the decision making process, that means many of that state’s citizens are automatically left high and dry, so to speak.
Missed or late credit card payments and medical bills are the biggest culprits that are lending to much lower FICO scores these days.
What to Do
If you’ve found yourself in the job market and are fearing the dreaded consent form that would allow a potential employer to run a routine credit check, the National Consumer Law Center says it’s important to be honest. Also, know your rights. You must be told that the consent form is specifically for a credit check. Then, once that report is run, the potential employer is required by law to provide you a copy of it and if you’re not selected because of your credit history, that company must provide to you, in writing, notification that your credit history played a role in the decision making process. Being honest allows you an opportunity to explain it. No need for in-depth details, but a simple,
I have no problem with that; however, I would like to reiterate that I have been out of work for several months and I believe that may be resulting in a weaker credit overall credit score. My finances are my priority, but securing a position is what will allow me to re-establish that strong payment history I’ve always taken pride in. I have been late with a few credit card payments, but I believe once you look at the overall picture, you will see a consistent payment history.
Also, you should have already established communication with your lenders. This is where you can take a potentially devastating event and created a less traumatic end result. Credit card companies already know how difficult the finances are for many families and missing a Visa payment is all too common these days. Being honest across the board allows you to work out a reasonable plan for avoiding a credit catastrophe.