You know the words ‘credit report’ and ‘credit score.’ You’ve heard that credit scores matter when it comes to getting a car loan or a mortgage.
Did you know that credit reports might also appear in the job world? In fact, your credit might matter more than you think.
I remember the first time I saw my credit score. It was printed on the top corner of my Macy’s credit card statement. It read 680, and I was about 19 years old.
I remember being happy with the number, but it was an uninformed happiness. I didn’t know anything about credit scores at the time. I didn’t know what a credit report was, or how it differed from my credit score.
What is Your Credit Report?
Now that I’m nine years older and wiser, I know that your credit report is different from your credit score.
Think of credit reports like your high school report cards. They show what you’ve been doing with your finances and lists information about your past and present credit accounts.
The information on your credit report can also indicate which of your credit accounts are in good standing, and which ones are not.
Good standing means you’ve made all the payments and you made them on time.
Credit scores are negatively affected by missed or late payments. These bad credit behaviors will be reflected in your report.
You have one credit report from each of the three major credit bureaus; TransUnion, Experian, and Equifax. All three bureaus build their reports using the information your lenders send them each month.
Now that we know what your credit report and credit score are, the question is: How are employment and your credit score related?
How Employment and Credit Score Are Related
While you may think that your credit report is just between you and your creditors, it’s actually information employers have access to.
When you apply for a job, employers may pull your credit report if they are interested in how you manage your finances.
Credit reports can be an indicator of the kind of employee you’ll be.
This doesn’t mean every employer will or does pull your report. In fact, 11 states have laws against employers using your credit report in the job hunt.
Those states are California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington.
Checking your report is simply an option that they have. Also, it’s important to note here: employers can pull your credit report, not your credit score.
Credit scores are meant for lenders, not for employers. When employers pull your credit report, it's considered a 'soft pull,’ which means it won't have any effect on your credit score in the same way as an application for credit would.
What Employers Look for on a Credit Report
What your credit report says might affect your chances of landing a job. Employers pull credit reports looking for incidents of embezzlement or fraud.
This means, if you’re applying for a job at a national bank, they’ll probably pull your credit report.
If you’re applying for a job at a restaurant or other job outside of the finance world, the chance that the prospective employer will pull a credit report is much lower.
It’s important to remember that your credit report is not the be-all-end-all of your job application. It’s just one of many factors that employers might use to pick the best person for the job.
All About Credit Reports and Scores
I’m sure by now you’re all fired up to find out how you can access your own credit report and score. It’s your right, and you should make it an annual practice.
Everyone is entitled to a free credit report from each of the major agencies once a year. This means you can get three total credit reports throughout the year.
It’s a good practice to check each of the bureaus every year. Compare what the reports say and make sure there are no errors.
Since each bureau does things a little differently, each report will read differently.
You can get your report online, by phone, or by snail mail.
Head to AnnualCreditReport.com to request online. You can request over the phone by calling 877-FACTACT, or you can fill out the Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
How to Get You Credit Score
On the other hand, getting your credit score is a little easier. The major credit score that 90% of major US lenders refer to is the FICO score. The second most popular credit score is the VantageScore.
Your FICO credit score will range from 300-850. The higher your score, the better.
A score in the 300-559 range is considered ‘very bad.’ With a score this low, you’ll have a difficult time securing a loan or credit.
If you do get a loan, you’ll have an incredibly high interest rate.
A score in this range can indicate to lenders that you are not responsible with your money.
This could mean you are a greater risk of defaulting on the account and lenders might think they have a lower chance of getting their money back if they give you a loan or credit.
A score at the opposite end, from 750-850 is considered ‘excellent.’ In this range, you’ll have access to the best interest rates and terms for any loan you seek.
Many credit card companies or budget apps like Mint will list your credit score on their statements if you use their products.
You can also check your score with Discover at their new platform, CreditScoreCard.com.
Tips to Improve Credit Quickly
Fortunately, if you’re on the lower end of the credit score spectrum, you aren’t doomed to bad credit.
You can improve your score fairly quickly. Remember, lenders report your credit history to the agencies each month.
So if you have a few good months in a row, your score will likely improve accordingly. Here are some things you can do to boost your credit score as well.
Check your credit report for errors
If there is an error on your report, it will drag down your score. Simply getting it removed can add points to your score.
Errors like a defaulted loan or a collection account should be removed. Call the credit bureau with evidence of the mistake to have it removed.
Make timely payments
Missed or late payments affect your score the worst. Lenders want to know that they are going to get their money back.
That goes for any line of credit: mortgages, car loans, student loans, or credit cards. Late payments stay on your report for seven years.
Making even just the minimum every month for several months in a row can improve your score.
Sign up for automatic payments if you have trouble keeping track of your payments and due dates.
Don’t close your oldest credit lines
If you have a credit card from ten years ago, keep it open! Lenders like to see a history of credit use.
If you’re new to credit, your score will be lower, which means aged accounts can be worth more to your credit score. Keep the oldest lines of credit open, so lenders can see your payment history.
Don’t use all your credit each month
Lenders like to see people using no more than 30% of their available credit line month. Anything above that signals that you might be irresponsible. If you’re using your entire line of credit to stay afloat each month, cut back.
Become an authorized user
This step should be a last resort, because it involves relying on another person’s good credit.
If you can get added to another person’s credit card as an authorized user, you could be able piggyback on their great credit score.
A new card will be issued in your name, but their payments will show up on your report.
This way, you use their timely payments to build your score up.
You are not responsible for making the payments in the lender’s eyes, as you’re only secondary to the account.
Do this only if you have a great relationship with someone and you can handle making the payments.
Credit reports and scores can be complicated and overwhelming.
Your credit score and your credit report are important when it comes to your finances, and your report might play a role in your employment.
However, it’s nice to know that both your credit report and score are in your own hands.
Regularly checking them both for errors, and sticking to good credit practices will help improve your score.
Plus if you’re regularly checking your credit score and report, you won’t be surprised by anything that might come up in a job interview.
You should work toward good credit, or protect it if you already have it.
We’re living in a credit-loving world, and your score will make a difference in the type of credit and interest rates you have access to now and in the future.