Your credit report is important when you apply for jobs
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Employment figures continue to recover after massive layoffs linked to the pandemic in March 2020, with Friday’s employment data beating expectations.
Non-farm payrolls increased by 943,000 jobs, according to the US Department of Labor. That brings overall unemployment down to 5.4%, down from the pandemic peak of almost 15% in April 2020. Job vacancies are increasing in the hospitality, government and business services sectors.
While your resume and LinkedIn profile may be up to the task for this next role, there is one factor about your application that you may not be considering, but your potential employer is: your credit report.
Why your credit report matters when you apply for a job
Your credit report is an overall picture of your ability to manage your credit and pay off your debts on a timely basis. This ratio is usually more important when applying for a car loan, mortgage or credit card.
Many jurisdictions have banned employers from considering credit reports when assessing applicants, and in recent years Congress has stepped in to try to ban the practice all together. However, many states still reserve the right to take your credit report into account when assessing for employment.
States that have enacted laws to limit employers’ rights to your credit reports are: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington. Several municipalities, including New York and Chicago, also have their own boundaries.
Although they will see information similar to what a lender can review, an employer will not receive the actual numeric number of your credit score.
Why Employers Check Your Credit
Potential employers check your credit for several reasons, including to verify your identity, but also to assess your level of financial responsibility. If your credit report is less than favorable, it can influence the employer’s decision when choosing the best candidate.
Critics say the practice unfairly targets low-income and minority communities, barring them from potential employment opportunities.
Additionally, millions of American credit reports are not completely accurate. According to a 2021 survey by Consumer Reports, 12% of Americans who checked their credit report said they found at least one error. And those errors appear to be increasing, as the Consumer Financial Protection Bureau (CFPB) reported a 54% increase in credit bureau complaints in 2020 over the previous year.
So, if you are looking for a job, consider using a credit monitoring service to avoid one more obstacle between you and your next job.
How credit monitoring services work
Credit monitoring services monitor all activity around your credit report. It is possible to do this manually by requesting a free credit report from AnnualCreditReport.com, but a monitoring service will automate the process for you. You can also receive your credit score for free through many banks and services, but the information they give you may not be as detailed as a full credit report.
In the event that you are offered a job and you consent to a background check, a credit monitoring service will notify you that someone is pulling your credit report. In addition to an employer checking your credit report, you will be alerted if you have any of the following actions initiated on your credit report:
- Difficult investigations on your credit report, like a credit card application
- New accounts opened in your name, like a new bank account
- Updated balances and payments on your credit products
- New address or name change to your credit report
- If your personal information is on the dark web, such as your social security number
- Public folder updates, like bankruptcies
Using a credit monitoring service is a great way to quickly spot fraudulent activity or identify errors that are already present, which helps prevent potential damage to your credit report.
Free or paid credit monitoring services
If a credit monitoring service is right for your situation, there are free and paid services to consider.
If you decide to pay for credit monitoring, there are affordable options that are billed monthly or annually. Paid services aren’t necessarily âbetterâ per se, but they will give you more features that will allow you to look more closely at your three credit reports (Experian, TransUnion, and Equifax).
If you want to try a free credit monitoring service, you may already have access to it through your bank or credit card provider. Large financial institutions like Capital One offer free credit monitoring services to everyone. And if you’re an American Express cardholder, you also have 24/7 access to your credit score.
Consider Experian’s free credit monitoring service, which offers a variety of useful features similar to what you’ll find in the Experian premium service:
Experian Dark Web Scan + Credit Monitoring
On the secure Experian site
Supervised credit bureaus
Credit rating model used
Dark web analysis
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