Red flags on a pre-employment credit check can scare away the employer of your dreams.

3 minute read

When you ace a job interview and the company offers you a position – contingent on a pre-employment background and credit check – the human resources department isn’t inquiring about your credit simply for the sake of curiosity.

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.

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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.

4. Liens

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.

5. Evictions

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?

If you plan to seek employment soon, avoid applying for credit multiple times, since an employer may see you as a potential financial liability.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC