Can a Bad Credit Report Stop You From Getting a Job?

Companies check more than your references and job history when you apply to work for them. In addition to the standard criminal background check, many employers now pull a credit report on job applicants. The credit report shows a snapshot of the candidate's level of personal responsibility. This may be a detriment to people with medical bills or the long-term unemployed whose credit has suffered.

Federal Law

The federal law that prohibits discrimination in employment against applicants who have filed bankruptcy does not apply to job seekers with other types of bad credit. Private employers can legally deny jobs to applicants with bad credit, according to the Federal Trade Commission.

Refusal to Hire

When many people apply for the same job, the employer may be very selective during the hiring process. The employer may eliminate candidates with financial blemishes, even if the job is not of a financial nature. An employer who refuses to hire a candidate due to information in the job candidate's credit report must supply a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act" to the job applicant.

Employer Attitude

Some employers believe that job applicants who do not manage their finances properly and pay their bills on time would be bad employees. According to Money Central, employers believe that people with bad credit are irresponsible and more likely to steal. Additionally, some employers believe that a job applicant who does not make good decisions in his personal life would probably not make good decisions at work.

What You Can Do

You should not give up looking for work if you have bad credit. Read the job application to see if it contains a clause giving permission for the company to run a credit report on you. If it does and you receive a tentative job offer, then offer both a verbal and written explanation before they run the credit check. The explanation should include the reason for the delinquency, such as unemployment or lack of health insurance, and that you have arranged with the creditors to repay the debts. If the employer knows in advance that you have control of your financial situation, he may not give much weight to a bad credit report.

Read More

How Do Timely Rental Payments Affect a Credit Score?

Credit scores are generally based on information that is reported to credit bureaus. While it is rare that a landlord or property management company reports rent payment history to a credit bureau, the consequences of not paying rent on time can end up on credit and tenant screening reports.

Credit Reporting

In order to report accounts to credit bureaus, a creditor must be a client of the credit bureau. This is an expensive undertaking, and simply isn't cost-effective for most landlords or property management companies, according to Maxine Sweet, Vice President of Public Affairs at Experian. As a result, on-time rental payments are not reported to credit bureaus and do not affect your credit score.

Collections and Evictions

While on-time rent payments are usually not reported to credit bureaus, some negative aspects of your rental history may end up on your credit report. For example, evictions and court judgments are a matter of public record and credit bureaus do monitor this information for inclusion on credit reports. In addition, some landlords may not choose to sue for any money still owed them, but may send the account to a collection agency that does report to credit bureaus.

Tenant Screening

Many landlords and property managers check references as well as credit reports when considering a tenant application. By paying your rent on time, you can help ensure that your landlord will give you a positive reference. In some cases, a good reference from a previous landlord can compensate for a spotty credit report.

Read More

Definition of a Subprime FICO Score

When lenders consider applications for mortgages, car loans or any form of credit, their first concern is to determine how likely it is they will get their money back. The FICO score is a number ranging from 300 to 850 (a perfect score) that summarizes the credit risk a potential borrower presents. The term "subprime" indicates a low score--low enough that there is a significant risk that the borrower won't be able to repay the debt.

Identification

There is no formal definition of a subprime FICO score. A FICO score is considered subprime if mainstream lenders won't extend credit because they consider their risk to be too great.

Dividing Lines

The majority of mainstream lenders consider a FICO score of less than 620 to be subprime or poor; 620 to 680 is fair; and a score over 680 is good.

Mortgage Lenders

Fannie Mae, Freddie Mac and other mortgage providers usually prefer a FICO score of 640 or higher, but will usually accept 620 with a good downpayment.

FHA/VA

The Federal Housing Authority and Veterans Administration use 580 as the standard for home loans, provided the borrower meets income requirements and has good credit behavior in the recent past.

Subprime Lenders

Some lenders specialize in providing "second chance" credit to people with subprime FICO scores. These subprime lenders charge high interest rates to offset the increased credit risk.

Read More

How Quick Can a Creditor Change a Credit Report?

Even though creditors can update records with the credit bureaus at will, they cannot control how long it takes to change a report. One type of company, rapid re-score, can change a report within a matter of hours. However, to use a rapid re-score company requires certain conditions and going through a lender.

Identification

In the scoring system set up by the major credit reporting bureaus, lenders control the information the bureaus report on a borrower's credit file. Updates can happen the same day, but the credit bureaus take up to 90 days to process new credit data forms from creditors and change data in a credit history, according to Smart Money.

Rapid Re-score Firm

The credit bureaus contract out some of the credit dispute process to rapid re-score companies. This type of firm has consent from the national credit reporting agencies to update reports almost instantly, but rapid re-score companies only work with financial institutions, such as banks and mortgage brokers. Thus consumers must find a lender willing send a request to a rapid re-score company. Most will do this for customers. The only difficult requirement is that the rapid re-score company probably won't investigate any claim beyond calling a creditor, so the consumer must get the creditor to agree that an item was a mistake before paying for a rapid re-score.

Considerations

The credit bureaus mostly automate the dispute system by sending a request to a creditor to re-report information. If a creditor has faulty data, it will keep reporting the wrong item, so fixing complex errors can take weeks or months. The Federal Trade Commission recommends initiating a dispute with creditors and the credit bureaus at the same time and including as much evidence as possible in a certified letter to any pertinent party.

Tip

Consumers can always write a letter of explanation for bad credit to future lenders until they resolve an issue with the credit bureaus. The bureaus allow consumers to leave a 100-word personal statement on any item in their credit file or the consumer could give the lender a longer, written letter. In any case, a letter of explanation could be enough to sway a lender's opinion of a borrower.

Read More

How to Check a Credit Score in Canada

Checking your Canadian credit score regularly helps you monitor changes, check for errors and see where improvements can be made. You can access credit disclosure reports for free, but these do not show your credit score. The two major credit reporting bureaus in Canada, Equifax Canada and TransUnion Canada, charge a fee to check your credit score.

Instructions

1

Get your credit score in Canada online. The process is simple and allows you to view your score instantly. Click the links in the Resources section to access the websites of the credit reporting bureaus.

2

Click "Get Started" for Equifax's site, then "Order Now," or, on TransUnion's site, check the box to include your credit score and click "First Time." Enter your details in the application form. Click "Continue."

3

Complete the payment section. The charge for a credit score from Equifax Canada is $23.95 as of 2010, while TransUnion Canada charges $22.90. Fees may change and may be different in certain provinces. Check the websites before applying for your Canadian credit score.

4

Review your application details. Click "Continue." Your personal details and identification will be verified, and your payment method will be authorized. Create a login ID and password. Click "Submit." Follow the instructions to view your Canadian credit score.

Read More

Why Does Cosigning Lower Your Credit Score?

When someone with a shaky or limited credit history applies for a loan, a borrower may offer a lower rate if the person can get a cosigner. The cosigner guarantees the loan will be repaid and becomes responsible for the loan if the borrower does not repay the loan.

More Debt

When you cosign for a loan, the credit scoring formula treats that debt as debt that you are responsible for repaying, even though you are just the cosigner. Having a large amount of extra debt will lower your credit score.

Payment History

The payments made by the person you cosign for will appear on your credit report. If the person makes late payments, your credit score will suffer.

Warning

Lenders often do not communicate with the cosigner about when late payments are made or if the borrower falls behind in payments until it is too late to protect the cosigner's credit report.

Read More

Does Getting Preapproved for a Mortgage Affect Your Credit?

Just shopping for a home could damage your credit rating. Fortunately, the damage done by mortgage preapproval usually has a marginal effect on your credit score, and potentially less damaging than shopping for other loans, such as a personal loan. You should run a report on your credit well before you start looking for a mortgage, and ask the lender about the credit rating it wants for its best rates.

Identification

Mortgage preapproval and any application for credit lowers your credit score by five or fewer points. Although one application is almost invisible, compared to the FICO scoring range of 300 to 850, multiple inquiries do an increasing amount of damage, and six or more inquiries can be damaging like a collections account or civil judgment. Inquiries impact credit scores for one year even though they appear on credit histories for two years.

Considerations

After the 2008 housing meltdown, many real estate agents require customers to have mortgage preapproval before working with them, because the real estate agent wants to know customers can afford a home, according to Lisa Scherzer of Smart Money. This means you must commit yourself to a credit inquiry regardless of whether you actually buy a home.

Rate Shopping

You should apply for a preapproved mortgage at several banks to find the lowest rate possible. The FICO scoring model allows you to apply for as many mortgages as you want within a certain amount of time, with all applications counting as a single inquiry. Depending on which formula the lender uses, the rate-shopping windows lasts between 14 and 45 days.

Be Prepared

Run a personal credit check at all three major credit bureaus for free from the Annual Credit Report website. You should not have any negative items in the past two years, such as missed payments or collection accounts. If you have any delinquent debts, contact the lender about settling the account. Also, ask the lender about its credit scoring brackets. The few points of damage by a credit inquiry can knock you into a lower bracket with a higher interest rate.

Read More