When the interview goes great and a potential employer is ready to welcome you to the team, you may think that the empty corner office down the hall is practically yours. However, any career plans with the new company could be tripped up if the potential employer wants to run a background check on you and finds information that makes management think twice about hiring.
On the other hand, a pre-employment background check could also work in your favor, showing a history of financial, employment and other life choices that demonstrate that you know how to come through on obligations and responsibilities. Whatever your past includes, knowing what a potential employer will see on the background check can help you prepare an explanation for any information that may be off-putting to a potential employer.
Employers are legally required to get your permission before running a background check during the hiring process. And if the employer takes an “adverse action” by not hiring you because of the screening, it must provide notice of the adverse action, a copy of the background check and allow you to make your case with an explanation. For example, you might need to explain that your credit took a hit when you lost your job due to the pandemic but now pay all your bills on time.
Not every background check is the same, since each company chooses the areas it needs to focus on when hiring new employees. However, you can count on at least one or more of the items below.
Thinking about omitting your short employment with a company that left a bad taste in your mouth? That’s probably not a good idea, since many pre-employment background screenings include your employment history. If you don’t include that former employer on your application for the potential employer running the background check, you look dishonest, and that’s never a good look for a job candidate.
Employers may include verification of your education credentials on a pre-employment background screening, so don’t make up a degree that you never earned, no matter how impressive it makes you seem to a potential employer. If the employer finds out you lied about your education credentials, there’s no way you’ll graduate to the next step in the hiring process.
Are you a late bloomer with a troubled past who worked hard to turn your life around? Maybe you made a bad decision once and received a criminal conviction that could still haunt you if the potential employer sees it during a background check. If your criminal record is from less than seven years ago, it will likely appear on the background screening report, although state disclosure laws vary.
Just like with a spotty credit history, getting ahead of a criminal record that could dim your employment chances is a good idea. So, if only the obligatory background check stands in your way of getting hired, be upfront with management about your spotty past and let them know you regret your actions and would never make the same mistake again.
How you handle financial responsibilities can also tell a potential employer a lot about your competence to handle other commitments and whether high debt could make you a financial liability to the business. An employer won’t see your credit score with a credit check but will have access to certain information from your credit report.
1. High credit utilization
Ideally, the ratio of revolving credit usage to available credit should be no more than 30%, according to major credit bureau Experian. Your credit utilization rate accounts for around 30% of your calculated credit score, so a high ratio of credit usage to available credit can also lower your credit rating.
So, why might an employer worry about high credit usage? A steep ratio could mean you’re in over your head financially, which could lead to theft, embezzlement or added stress and anxiety that could take attention from your work.
Pay off credit card accounts or at least pay them down to lower your credit utilization ratio. Don’t close the credit card once the balance is paid off since that available credit works favorably toward your credit score.
Find out: What is Credit? The Ultimate Guide
2. Late payments
If you’re a few days late on a car payment or credit card bill, the credit won’t report the past-due payment to major credit bureaus. Wait more than 30 days to pay, however, and the creditor is likely to report your late payment, which can lower your credit score.
Late payments are a big deal since payment history comprises around 35% of your credit score. But lenders and creditors aren’t the only ones who notice late payment history. Employers notice it too, since paying late could signal poor money management, disorganization, inattention to details or a disregard for instructions or rules.
Get ahead of the problem by being upfront with potential employers who plan to run a pre-hire credit check, explaining why you paid late and assuring them that you now pay on time.
3. Bankruptcy or foreclosure
Bankruptcy stays on your credit report for up to 10 years. If you lose your home to foreclosure, that information will remain on your credit report for up to seven years.
If you fell behind due to job loss, medical bills or another legitimate reason for not being able to make payments, don’t wait for a potential employer to find out from a pre-hiring credit check.
If you’re honest about what happened, that shows character and integrity – highly desirable qualities for any employee.
Tax liens no longer appear on your credit report, but a lien against your property will since the creditor must file a claim in civil court to obtain the lien.
Just like high debt could signal that you’re overextended and trigger fears of theft to a potential employer, so might a lien against your property.
If you consent to a pre-employment credit check – and consent is legally required before an employer is allowed to perform a background check – be honest about any lien against your property and assure the employer that you are more financially stable now.
When you are evicted, the judgment is a public record that will appear on your credit report for up to seven years. If you were evicted, that may raise a red flag to an employer that you may not be someone who follows through on commitments or has too many bills to pay, again posing a theft risk.
If you were evicted because you lost your job, had medical bills or weren’t a good money manager, explain what led to the eviction to a potential employer. Consider taking a class on money management through a nonprofit credit counselor to show potential employers that you’re serious about becoming a better money manager.
6. A Flurry of new accounts activity
When you apply for a bunch of credit cards in a short period, that information can make you look desperate for money to a potential employer. They may wonder why you suddenly need so much more credit available.
Applying for several new credit cards could make employers wonder where all your money is going. Too much debt? Gambling addiction? Poor impulse control?
How can you prepare for a credit check?
If you plan to seek employment soon, avoid applying for credit multiple times, since an employer may see you as a potential financial liability.
If you know that your credit history includes information that’s going to make you a less desirable job candidate, you might want to get ahead of the bad news. Explain to the interviewer before the company runs the background check the specific factors that affected your ability to pay, how you’ve worked on improving your credit and what you’re doing now to get back on track. That way, you present an honest picture of yourself and a sense of accountability, both desirable traits in an employee.
Before applying for jobs, get a free copy of your credit report from AnnualCreditReport.com so you’re aware of any credit history that might work against you with a potential employer.
Get professional help to clean up errors in your credit report.
Article last modified on May 15, 2023. Published by Debt.com, LLC