Many of us consider that our financial situations is something we’d rather keep private, and not discuss with people we don’t know very well. It can therefore come as quite a shock that an employer wants to run a credit check on you because you’ve applied for work in a bank, financial services company or in some other position of responsibility. Why do companies credit check, and what does it mean for applicants?
Credit Checking and Credit Scoring
One thing to make clear is that credit checking isn’t the same as credit scoring. We’ve all seen these apps where you can log on and find out your credit score number, with tips of ways to increase credit worthiness. Credit scores are about risk – how able are you to pay back a loan or credit card bill? Credit checking is different in that it is actively looking for problems in your file, whether that be County Court Judgements, missed payments on loans, or a history of debt stretching back many years. An employer who wants to run a credit check on you requires your permission to do so. If you refuse, they can’t go ahead and check anyway, but of course they can also refuse to employ you. They may also, depending on the role, run a DBS check on you which would show up any criminal convictions for money related matters such as fraud or theft.
Banks and other financial institutions want to employ people who are going to act responsibly around the large sums of cash they might be handling every day. Staff often have access to computer systems to allow them to transfer money between accounts, raise invoices or make payments. Simply put, they want to employ people with no obvious financial difficulties. It is felt that people who are seriously in debt or desperately trying to make ends meet might be tempted to commit fraud.
Performing Your Own Credit Checks
Even if you’re not thinking about applying for a job which requires credit checking, it makes sense to keep an eye on your credit file. Those apps we mentioned before are a great tool if you know how to use them. Sign up for one of the apps from the major credit reference agencies and look at what’s displayed. If there are any mistakes, get them corrected. If there’s an old outstanding debt you’d forgotten about, start paying it off. Make sure you’re on the electoral role at your home address, and have a credit “footprint”. Often people who have always lived at home with their parents and have no utility bills, credit cards or insurance policies in their own name struggle with credit checking as there’s just not enough information about them to make a decision. Get into the habit of checking the app every few weeks to make sure there’s nothing which might raise an issue. As well as protecting your credit score, this is a great way of keeping your eye open for identity theft issues too.