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Why Your Credit History is Important to Potential Employers

Why Your Credit History is Important to Potential Employers

As hiring has evolved, potential employers are reviewing much more information in deciding whether or not to hire prospective employees. Potential employers are no longer content to review a resume, and contact references. They will also review social media history, social/club affiliations, and credit history. Why is credit history important to a prospective employer? There are several reasons:

The most obvious reason is that a satisfactory credit history demonstrates financial responsibility, which hopefully will translate into responsibility in other areas, such as employment duties. The potential employee’s maintenance of credit is a gauge as to their ability to identify and assess risk, educate themselves about the risk and then manage that risk accordingly. In this instance, a well – managed credit history is viewed as a positive when compared to other applicants.

However, a negative credit history will do more damage to an applicant’s job chances than a positive credit history will do to enhance those chances. While a positive credit history is viewed as proof of financial responsibility, a negative credit history will be viewed as some proof of irresponsibility, even if the negative reported items were beyond the applicant’s control.  Divorce, health issues, and periods of unemployment will be beyond the control of most consumers and will directly lead to a negative credit history. However, some employers may not choose to delve more completely into the reasons for the negative credit history.

Beyond the indicia of responsibility or irresponsibility, employers have several practical concerns about a negative credit history. Accounts that are delinquent, or that have been turned over for collection may result in multiple phone calls which can distract an employee from their duties. There will also be a fear from some employers that their employees may embezzle or misappropriate funds in order to satisfy their delinquent debt obligations. Finally, employers are always concerned about the consequences of a wage garnishment, as the failure of the employer to promptly comply with a wage garnishment can result in the employer becoming responsible to satisfy that judgment.

While many consumers are legitimately concerned about the effect that a bankruptcy filing would have on their credit history, especially if reviewed by a potential employer, it is important to remember that a bankruptcy filing will eliminate the practical concerns that an employer would have with respect to an employee.  A bankruptcy filing prevents any attempt to collect the debt, which would include phone calls, lawsuits, and wage garnishments. As a result, an employer would not have to worry about a client being distracted by collection calls, or responding to a wage garnishment.

If you find yourself in a situation where you are constantly receiving phone calls or have been threatened with a lawsuit to collect the delinquent debt, it would certainly make sense to meet with a bankruptcy attorney. Eliminating debts on a negative credit history may relieve the concern of potential employers that the performance or attitude of an employee may suffer due to mounting debt concerns.