Why Would a Potential Employer Need to Check My Credit?
by valorey | Jun 27, 2020 | Uncategorized | 0 comments
Why Would a Potential Employer Need to Check My Credit?
“I lost my job due to COVID-19, so I’ve been desperately seeking employment. I’ve put out several applications and finally got a call back to interview. During the interview, they told me that they perform a credit check on the person that they choose. Why would a potential employer need to check my credit?”
Thank you to a loyal friend and client for this question.
There are many reasons why a potential employer will want to check your credit before you are officially hired. We will go over those reasons in this blog post, as well as what they can see, your rights, and if the state of your financial health will cost you a great job.
According to HR.com, in 2018 approximately 95% if employers used some type of background screening in their employment process. However, only 16% will ask to pull your credit. Background checks are needed for a multitude of reasons and resources such as:
- Criminal background
- Identity verification
- Credit report
- Education verification
- Driving records
- Drug & Alcohol testing
- Sex Offender Registry
- Professional License Verification
- International check
- Social Media
But, why would they need to check my credit in the first place?
This practice is most common where you are being considered for a leadership position, jobs that involve money, jobs where you would be responsible for confidential information, and many more. If it doesn’t make sense to you, be honest and ask why they perform credit checks and what they are looking for. This is a great way to set your mind at ease while you await to complete the employment process.
For example, if you are being considered for a position in a bank, it would make sense that they wouldn’t want someone with a background of embezzlement. It can also give a good indication if you are truthful with the information on your application and what you told them during your interview.
What can they see?
Your credit report details to an employer are limited. They can see things like:
- Credit and payment history
- Types of credit
- Available credit
- Other outstanding balances
- Student loans
- Previous employers (not all employers report employment, so this information is likely pulled from another source)
- Identity verification – SSN, birthdate, previous addresses, etc
What about my credit score?
Your employment credit check does NOT reveal your credit score. They can only see the items I listed above. Those items broken down into five components can give the trained eye what your approximate credit score is, but anyone willing to go that far isn’t worth working for in my opinion.
From my own personal experience, they only wanted to use my credit report as a layer of identity verification and could care less about my payment history.
What they choose to take from the employment based credit report is up to the employer. Don’t be afraid to ask. Asking what they look for is a sign that you care about your credit.
What are the factors to my credit score as it is reported?
The five components to your credit score are:
- 35% Payment History
- 30% Accounts Owed
- 15% Length of Credit History
- 10% Credit Mix
- 10% New Credit
Your credit score is NOT on your employment credit report!
Will it hurt my credit if they do pull my credit report?
No. An employment credit check is a soft pull.
The only type of credit checks that show up on your credit report are hard inquiries. Depending on your credit, having a hard inquiry can cause your credit to increase by a few points, or decrease by a few points. It’s important that you keep your hard inquiries to less than 2 every 12-24 months. The more hard inquiries you have, the more points you will lose.
Personally, I prefer to keep my hard inquiries to 2 or less every 2 years. Why? At the end of two years, they will fall off of your credit.
Bonus Credit Report and Score Information on Mortgage Window Shopping
There is a shopping window for comparison shopping for mortgages without damaging your credit. I advise all of my clients to try to complete their mortgage shopping within 14 days, even though you have 45 days – anything can happen. Houses aren’t staying on the market very long, so if you’ll need to be ready to jump when the time comes.
Also, be mindful of the current climate of the economy, if rates are increasing/decreasing, and get locked into the best rate possible.
This ONLY applies to mortgage lenders.
According to the Consumer Financial Protection Bureau, the window shopping will only count as 1 inquiry on your credit report no matter how many mortgage lenders you consult with during this time.
7 Steps to Taking Control of Your Finances
Take a deep breathe and let it go.
Dealing with money issues causes a great deal of stress. Some people shut down and will ignore it until it is too late. Bill collectors calling is stressful. Late notices in the mailbox is stressful. Why do we allow ourselves to go this far?
Naturally, as humans, we actively seek dopamine pleasures and will – sometimes – callously choose to take flight from our problems as if they will go away. They don’t. They eventually hit our credit and make it impossible to get lending or financing for homes, cars, or lines of credit.
These seven steps, or phases, of taking control of your finances will locate you right where you are and provide a little guidance along the way.
Here are the 7 Steps to Taking Control of Your Finances
Step 1: Awareness
You are aware there is a problem. There is an unhealthy situation going on and you’re stressed out. You’re overwhelmed with choosing between paying or saying “F it”. If you have a $50 bill and only $60 to your name – and you need to buy groceries – you’re going to buy groceries.
ignoring the bill isn’t healthy, but that doesn’t mean you should go without food in order to keep the creditors away. Dealing with bill collectors is stressful and it doesn’t help when the person on the other end is rude. The best thing you can do is suck it up and call them and let them know you’re aware of the debt (if you truly and accurately owe it) and make arrangements on when you will be able to pay it. This keeps the bill collector quiet for a while just long enough for you to find the money to pay it and keep the derogatory information from hitting your credit report.
This scenario relates to a relatively small amount and there are many of you out there that wish that was all they owed. I see you. It’s okay. We will figure it out.
Step 2: Urgency
Are you feeling a sense of urgency about your financial problems? You wish you had the money to just pay everything off. Maybe you wait until a tax return arrives to pay off debt, or get debt caught up.
If you’re like many Americans with accounts in collections, 30 – 60 – 90+ days overdue, you desire to own a home, maybe it’s time for a car. Either way, you’re in a situation that doesn’t allow for emergencies, much less, luxuries.
The urgency you are feeling is good because it will lead to the next step or phase of entering a place of financial well-being.
Step 4: The Search
This is the phase where you have begun your search for solutions, which is most likely what lead you here. You are seeking education and options. I spent months and months using Dr. Google to locate information on how to handle my debts, and how I should budget my money.
What I ended up finding was mostly useful, but also mostly things I didn’t understand. I had to do more research just to understand the first bit of research I had found. Many times, it would be or feel like a waste of time because it wasn’t for me. Dispute letters, generic templates… they were all so different and didn’t really apply to my situation.
My attempt to find a money coach was far reaching as many of them hadn’t been in a situation of understanding why my credit was shot in the first place. I wasn’t about to allow someone else to make me feel worthless. I needed someone who could relate to domestic violence, economic abuse and gas-lighting. If they couldn’t relate, at least have some empathy.
I firmly believe that my path to becoming a Certified Financial Health Counselor was divinely lead in order to help women like me get the financial resources they need to become financially healthy without the weight of shame and embarrassment clouding them. Enough is enough and it’s time to take control of what you can.
Step 5: Thinking About the Do Nothing
Oh girl, we didn’t come this far to come this far.
So many people get to this step and throw in the towel when there is only two more steps to go. Don’t be that person!
This is when clients start to explore – seriously – if ignoring the problem would be a better option. Giving up – in other words.
Other times it is when the debt owed grows interest faster than you can possibly pay off. I see this a lot with store credit lines where buying a $600 stove costs you $1800 in the long run. Either pay the credit card in full or pay in cash. Another option would be to transfer the debt to an interest free credit card if possible. I see this a lot with home improvements where insurance only covered so much and it’s up to the homeowner to bring it up to par. I’ve been where the payment was $200, I pay $500 and get hit with $180 in interest. While my debt should have went down by $300, it only went down by $112. That doesn’t do a whole lot for debt to credit ratio. In fact… it sucks.
There are many ways this can be fixed. While you have options, doing nothing is exactly that – doing nothing. It’s not going to go away; at least not any time soon. If you’re in this space, then it’s time to seek guidance from a financial counselor, like myself.
Step 6: Decide
We have come to the glorious place where the you have made a decision to take action. Maybe you have some assets you can sell, or perhaps you can take out a home equity loan, or maybe it’s as simple as a doable monthly budget that still allows you to live your life without much sacrifice. Don’t get me wrong, there is still sacrifice, but it will pay off in the end.
Making the decision is a huge and very welcoming step, but it’s not over yet. There is still another step to go. If you have gotten this far then you are well on your way to financial health.
Step 7: Commit
You’ve come this far and now it is time to commit. You have listened to your heart. You have made your decision. You fought through the hardest part out of all of this. Your head and your heart agree, it’s time to pop the question…
Will you commit to your plan for better financial health?
You are worthy of your dreams. I know times may be hard right now, but it will be okay and we will get through this. If you are interested in working with me to create a doable plan that both your head and heart will agree with, please email me at email@example.com
Many of you have asked about a membership group to get group coaching from me. I am currently working on a membership access and will be launching it soon. Be sure to subscribe to my newsletter for updates.
Stress and Money
Poor Elaine. We’ve all been there, amiright?
I have a sneaky suspicion you may be there right now.
Living paycheck to days before the next paycheck, having no savings, no emergency fund, your credit is shot. I’ve been there.
I had dream boards with all of these out-of-reach desires staring me in the face everyday. I even wrote myself a check for $1 million dollars. The future date on that I put on that check expired 3 years ago. I’ve even switched banks since then. And yet, still not a millionaire.
Even though I may not be a millionaire yet… I learn from millionaires what I needed to do where I was in order to create that path to becoming a millionaire. Far from just having the right mindset, daily affirmations, dream or vision boards, was developing the actual habits I needed to create to see the physical fruition.
I was completely stressed out about money, finances, and my credit. My credit report once filled with negative remarks, delinquent accounts, closed accounts, mountains of student loan debt yet. My BSBA//Business Marketing was being put to work as a Content Manager at the age of 37 for a marketing agency at a lousy $13 per hour. As a single mother with two teenage boys and a darling little girl, this wasn’t going to cut it.
I was renting a small two bedroom apartment living paycheck to just days before the next paycheck. I dreamed of owning a home. I was seeing my friends from school who had been in their careers 15 or so years, happily married, children younger than mine, and homeowners, who take annual family vacations and spend the weekends on their boats. The “comparison-itis” was killing me. I was so focused on the lack of what I didn’t have that I had let it dictate and get the better of me.
I kept pushing myself in the corporate world. I felt like loser, I felt worthless. I was competing in the mans game and was up against some of the most ignorant men on this planet. No offence to the great men that are out there. While I was running circles around them, they fired back with words I will never forget. They would brain-wash female employees into thinking that they were “doing them a favor letting them work there” and that they “would NEVER make it in this industry.”
Let’s take a look at some numbers…
College educated women who desire and deserve to work in the upper-management or executive leadership roles tend to approach their goal right around the time they want to start their families according to Tiffany Dufu, author of Drop the Ball. She goes on to report that women make up 53% of corporate entry-level positions, but only 14% in the executive levels. Nearly 95% of male executives are married with children. All of this math and statistics tell us that 7% of corporate executive women are married and less than 4% are married with children.
This is a huge problem. Why are these women opting out, or not being allowed or limited to meet diversity laws (in some companies)?
Kate Northrup, author of Do Less, makes a point by suggesting the expectation that working less than 55 hours a week, bragging about not taking vacations, and answering email at 3 in the morning is not only demeaning to anyone’s quality of life regardless of gender, but is expected. As Northrup goes on to report, we should not have to do those things to prove our value.
From my own personal experience, I can say this with absolute certainty – the gas-lighting in the corporate world is real. They can’t tell you to do those things, but they damn sure expect it or you will be put on the chopping block for under-producing, or better-yet – insubordination. They find their ways.
I know plenty of stay-at-home-moms who desire to return to work once their children are old enough. Oftentimes, when they do reach the pentacle of their career, they are slighted by changes in infrastructure, technology, competing with a younger generation, even younger bosses.
That stress factor alone is enough to drive someone insane! And the money, whether it’s good or below par, doesn’t mean anything if it isn’t managed in a healthy way. When we are stressed we tend to manage our money, along with other aspects of our lives, in unhealthy ways as well.
Emotional spending, buying outside of necessity for guilty pleasures, buying things before paying bills. You somehow justify that letting this or that bill go for as long as possible because you want to feel the dopamine of buying your own guilty pleasures isn’t healthy. That bill keeps you up at night. It stares you in the face when you look at your mail. It haunts you when they call your phone asking where their money is. It hits your credit and your score takes a plunge.
People lose their homes and cars over this every single day. It’s NOT okay! We have to train the brain to enjoy the dopamine from paying your bills and saving money. We can set milestones and reward systems along the way, so maybe when you hit $1,000 in your savings, you can buy yourself something special. You can do the same when you get to $2,500 and $5,000.
As Dave Ramsey says, you have to protect your four walls first and in this order-
With that said, you’re going to have to start a budget. Be watching out for my upcoming budgeting workshop to help you come up with creative ways to save money and pay bills on time. Let’s get you stress free! Now, back to stress.
It is scientifically proven that stress depletes our bodies of nutrients, like magnesium, for example. We can choose to either fight or take flight. The patterns I have been seeing in the most successful women in their fields is taking flight.
They say… fuck that shit, I’m out and start their own business or join an MLM. We see it. We get annoyed by it, but we don’t see the picture behind it. I think if we really knew and understood the reasoning behind it, we could appreciate the hustle a little more. Some succeed, many fail. Failure is okay. It’s a teaching lesson that opens us up to what we are destined to do.
I left the marketing agency and started my own. When I did that, I not only made more money, but was highly successful. I learned something along the way that opened my eyes to a whole new world to owning a business.
There was an in-between. Miserable at my J. O. B. I fixed my credit. Raised my score by 200 points. Saved $8,000 and bought my first home. I closed 1 month before my 38th birthday! It only took me 15 months, making $13 an hour, and sticking to a doable budget that led me to where I am today. It wasn’t until about 3 months after buying my home that I opened my marketing agency.
I have taught many other women to fix their credit and buy a home all while I was running marketing agency, and it gave me a great feeling inside. I was doing something out of love instead of just know-how. I know marketing inside and out, but I was losing passion for it. I was gaining weight, losing hair, my sleep sucked, I was working around the clock. It no longer served me in a way it had done before. I actually started to hate it.
I chose to opt-out.
I decided to create a whole new system and my health is thanking me for it. I wish the corporate world would recognize the there is a better way of doing things.
What is a Financial Counselor and Why Do I Need One?
During one’s journey to becoming financially healthy, it is important to seek professional guidance in order to prevent making the same mistakes with your money over again. Financial Counselors help address money-related issues that are not only personal, but can be very painful for some.
The role of the Financial Counselor is to assist and support you through your journey from financially unhealthy to financially healthy through resources, customizing viable action plans, providing problem solving expertise and sources of data about current lending practices and consumer protections.
The most important role of the Financial Counselor is to motivate you to work towards your goal and break the negative money mindset that has been holding you back.
Financial Counselors take an holistic approach to discovering financial problems. Research shows that most people operate their financial management with 80% behavior and 20% know-how. How you behave with your money creates either a positive cycle or a negative cycle that could pass down for generations.
Why I Became a Certified Financial Health Counselor
If you’ve taken the time to read my About Me page, you know sad details my story. I pride myself on being a very positive person, but my story is my story. I couldn’t have got to where I am today if it wasn’t for recognizing there was a problem and that I needed to figure out how to solve said problem.
I always wanted to own my own home. I never truly knew how and was given some bad advice over the years. I figured one day I would be older, wiser, and have more money. I was pretty good at saving money, but I was never good at staying at a job. I never was happy at any job I have ever had.
I was never destined to be anyone’s employee. I have skills and talents most other people do not have that would be of great value to them. I was stupidly good at social media marketing and did that successfully for ten years. I even opened my own full service marketing agency about a year after I left an abusive marriage. I had used social media marketing as a catalyst to save money for my escape. Over the years, he found the money and the only credit card I had to build my credit. Before too long, I was broke and bankrupt, but I kept going.
On January 20, 2017, I left with my kids, no job and just $20.
On April 30, 2018, I closed on my home with my own money and my own credit. I had no financial help. I had no co-signer. And I still had several thousands of dollars in my savings account. The only problem that I had was that I was miserable in my job. About a year before, I started losing interest and passion in managing other businesses social media accounts.
I had used social media management as an escape. I was having triggers and memories come to the surface. I was having trouble truly healing from what I had been through. I found myself still attracting abusive and manipulative people into my life because of this trauma. Abusive employers, toxic co-workers, jealous friends/family… it was time to let them all go.
In the meantime, several friends had reached out and asked me how I fixed my credit, saved money, and bought a home. I taught them and they have successfully been able to do what I have done. By teaching them the fundamentals and giving them the tools, they each have been able to save money, pay down debts, increase their credit score, and make the investments of their choosing.
I taught them so much more beyond the numbers. We were able to unearth and find where the unhealthy patterns started so we could create a healthier pattern for their future. The first step is acknowledging there is a problem.
Awareness of Your Relationship with Money
Most people have an emotional bond with money through some sort of trauma or past negative experience that led them on a journey of financial self-destruction. While some people spend their money as fast as they can, other people hoard their money and even go without basic needs in order to not go without money.
Both behaviors are triggered out of fear.
The journey of self-discovery and breaking bad money habits is very personal. Just like a cut – it’s painful, you nurture it, medicate it, and it heals. While the cut is healing, if you touch it or bump into something, it hurts, but over time the pain becomes more tolerable and then it goes away. You are healed and sometimes there is a scar, but that scar should always be seen as a victory mark.
Why are some people “rich” and some people “poor” even though the “poor” person may be smarter or more talented than the “rich” person?
Awareness of Your Current Financial Well-Being
While we will calculate a lot of numbers and determine your net worth, your financial well-being is so much more than a number. We look at past and current spending habits, saving habits, assets, financial goals, cash flow, credit rating, and more.
“How you perceive and interpret your financial situation is even more important than how much money you actually have.” – Patricia Hunter
If you do not know these fundamentals and acknowledge these behaviors of your financial health and money mindset, stress, frustration, and fear will always win.
If your bills surpass your income, you will not be able to pay your bills on time. If you don’t have an emergency fund, you will suffer a heavier blow on top of the stress from an emergency situation. You have to have a plan.
You cannot buy long term happiness.
There are many things we, as humans, cannot control in this world, but you can control to how you react and respond to situations.
You can control the money you have coming in and you can create more of it.
You can control what you choose to spend your money on and you can control what you choose to don’t spend your money on.
You have to pay your bills, but what if there was a way to lower that bill or even eliminate it. Do you know your rights, current trends and legislation that would work in your favor?
Your Financial Health Checklist
I have a gift for you. Download and print the Financial Health Checklist. Take a few minutes to fill it out. Be honest and truthful with yourself as you answer Yes or No to the statements. It’s time to acknowledge where you are and where you want to go so we can make a plan you can stick to.