Negative Credit Can Affect Your Job Search

Many employers run credit checks before hiring new employees.


Bad credit can affect your ability to get more credit. Did you know it also can affect your ability to get or keep a job? Employers often use a credit report when they hire and evaluate employees for promotion, reassignment, or retention.

The military has been doing this for years for personnel that require a security clearance. They run background checks with local police, the FBI, and financial institutions. The military does not want to grant a security clearance to individuals with a history of bad credit. This would make them a risk of stealing classified material and selling it to cover their debt.

Add in the current sub-prime lending mess and thousands of foreclosures, you can see why employers are concerned that their new employees have pristine credit. No one wants to hire someone that may be a risk due to huge credit card debt or a mortgage in default.

According to the Fair Credit Reporting Act (FCRA), which is enforced by the Federal Trade Commission (FTC) and your state Attorney General, an employer must get your permission to look at your credit report. If you don’t get a job because of information in your report, the employer must show you the report and tell you how to get a copy from the consumer reporting company. There is no charge for the report if you request it within 60 days of getting notice that you did not get the job.

The FCRA requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. To order your free annual report from one or all national consumer reporting companies, the annual credit report web site, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281. Do not contact the three nationwide consumer reporting companies individually. They provide free annual credit reports only through 877-322-8228, their web sites, and Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281.

According to the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To protect your rights under the law, contact both the consumer reporting company and the information provider to dispute any information.

It is hard enough to find or maintain a good job without having credit worries spoil it. Keep your credit record clean; check it often, and good luck with the job search.

Self Help May Be Best When It Comes To Credit Repair

Should you seek assistance from a credit card repair company or attempt to fix your credit yourself?

You see the advertisements in newspapers, on TV, and on the Internet. You hear them on the radio. You get fliers in the mail. You may even get calls from telemarketers offering credit repair services. They all make the same claims:

“Credit problems? No problem!”

“We can erase your bad credit — 100% guaranteed.”

“Create a new credit identity — legally.”

“We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!”

Do yourself a favor and save some money, too. Don’t believe these statements. Only time, a conscious effort, and a personal debt repayment plan will improve your credit report.

This article explains how you can improve your creditworthiness and gives legitimate resources for low or no-cost help.

The Scam

Everyday, there are companies nationwide that appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they can’t deliver. After you pay them hundreds or thousands of dollars in fees, these companies do nothing to improve your credit report; most simply vanish with your money.

The Warning Signs

If you decide to respond to a credit repair offer, look for these tell-tale signs of a scam:

companies that want you to pay for credit repair services before they provide any services.

companies that do not tell you your legal rights and what you can do for yourself for free.

companies that recommend that you not contact a credit reporting company directly.

How To Dispute Mistakes On Your Credit Report

Credit card reporting companies can and do make mistakes on your credit report.
You can dispute mistakes or outdated items for free. Under the Federal Credit Reporting Act (FCRA), both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.

Step One
Tell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, “return receipt requested,” so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.

Consumer reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting company must give you the results in writing and a free copy of your report if the dispute results in a change. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider. If you request, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

Step Two
Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct – that is, if the information is found to be inaccurate – the information provider may not report it again.

Getting Credit When You’re Over 62

Credit is an important money management tool for both young and older consumers. Yet the elderly, particularly older women may find it difficult to get credit.
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If you’re an older consumer who has paid with cash all your life, you may find it difficult to open a credit account. That’s because you have “no credit history” of how you paid on credit. If your income has decreased, you may find it harder to get a loan because you have “insufficient income.” Or, if your spouse dies, you may find creditors trying to close joint accounts. A “joint account” is one for which both spouses applied and signed the credit agreement.

Under the federal Equal Credit Opportunity Act (ECOA), it’s against the law for a creditor to deny you credit or terminate existing credit simply because of your age. This brochure explains your rights and offers tips for applying for and maintaining credit.

Applying for Credit

Applying for credit used to mean asking your neighborhood banker for a loan. Now, with national credit cards and computerized applications, the day of personal evaluations may be over. Instead, computer evaluations look at, among other things, your income, payment history, credit card accounts, and any outstanding balances. Paying in cash and in full may be sound financial advice, but they won’t give you a payment history that helps you get credit.

A major indicator of your ability to repay a loan is your current income. Those who consider income must include types of income that are likely to be received by older consumers. This includes salaries from part-time employment, Social Security, pensions, and other retirement benefits.

You also may want to tell creditors about assets or other sources of income, such as your home, additional real estate, savings and checking accounts, money market funds, certificates of deposit, and stocks and bonds.

If you’re age 62 or over, you have certain other protections. You can’t be denied credit because credit-related insurance is not available based on your age. Credit insurance pays off the creditor if you should die or become disabled.

On the other hand, a creditor can consider your age to:

- favor applicants who are age 62 or older.
- determine other elements of creditworthiness. For example, a creditor could consider whether you’re close to retirement age and a lower income.

While a creditor cannot take your age directly into account, a creditor may consider age as it relates to certain elements of creditworthiness. If, for example, at the age of 70, you apply for a 30-year mortgage, a lender might be concerned that you may not live to repay the loan. However, if you apply for a shorter loan term, increase your down payment, or do both, you might satisfy the creditor’s concerns.

Checking Your Credit History

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

You may find that your file doesn’t list all of your credit accounts. That’s because not all creditors report to consumer reporting companies. You may ask that additional accounts be reported to your file. Some bureaus may charge for this service.

Credit information about shared accounts should be reported in your name and your spouse’s. If it’s not, ask the creditor in writing to report the account in both names.

The Fair Credit Reporting Act (FCRA) requires each of the major nationwide consumer reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months.

To order your free annual report from one or all the national consumer reporting companies, visit: www.annualcreditreport.com; call toll-free: 1-877-322-8228; or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Do not contact the three nationwide consumer reporting companies individually; they provide free annual credit reports only through www.annualcreditreport.com, 1-877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

Some Credit Information You May Not Know

Here is some credit information that you may not have heard of before.

Rights to Free Credit Reports

Under federal law, you’re entitled to a free credit report if a company takes adverse action against you, such as denying your application for credit, insurance or employment, and you request your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company that supplied the information about you. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud. Otherwise, a consumer reporting company may charge you up to $9.50 for additional copies of your report.

To buy a copy of your report, contact:

Equifax: 1-800-685-1111
Experian: 1-888-EXPERIAN (1-888-397-3742)
TransUnion: 1-800-916-8800

Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont already have free access to their credit reports.

If you ask, only the last four digits of your Social Security number will appear on your credit reports.

Establishing a Credit History

If you’re denied a loan or credit card because you have no credit history, consider establishing one. The best way is to apply for a small line of credit from your bank or a credit card from a local department store. Make sure you list your best financial references. Make payments regularly and make certain the creditor reports your credit history to a credit bureau.

If Your Spouse Dies

Under the ECOA, a creditor cannot automatically close or change the terms of a joint account solely because of the death of your spouse. A creditor may ask you to update your application or reapply. This can happen if the account was originally based on all or part of your spouse’s income and if the creditor has reason to believe your income alone cannot support the credit line.

After you submit a re-application, the creditor will determine whether to continue to extend you credit or change your credit limits. Your creditor must respond in writing within 30 days of receiving your application. During that time, you can continue to use your account with no new restrictions. If you’re application is rejected, you must be given specific reasons, or told of your right to get this information.

These protections also apply when you retire, reach age 62 or older, or change your name or marital status.

Kinds of Accounts
It’s important to know what kind of credit accounts you have, especially if your spouse dies. There are two types of accounts — individual and joint. You can permit authorized persons to use either type.

An individual account is opened in one person’s name and is based only on that person’s income and assets.

If you’re concerned about your credit status if your spouse should die, you may want to try to open one or more individual accounts in your name. That way, your credit status won’t be affected.

When you’re applying for individual credit, ask the creditor to consider the credit history of accounts reported in your spouse’s or former spouse’s name, as well as those reported in your name. The creditor must consider this information if you can prove it reflects positively and accurately on your ability to manage credit. For example, you may be able to show through canceled checks that you made payments on an account, even though it’s listed in your spouse’s name only.

A joint account is opened in two people’s names, often a husband and wife, and is based on the income and assets of both or either person. Both people are responsible for the debt.

Account “Users”

If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse’s name as well as in yours (if the account was opened after June 1, 1977). A creditor also may report the credit history in the name of any other authorized user.

If You’re Denied Credit

The ECOA does not guarantee you’ll get credit. But if you’re denied credit, you have the right to know why. There may be an error or the computer system may not have evaluated all relevant information. In that case, you can ask the creditor to reconsider your application.

If you believe you’ve been discriminated against, you may want to write to the federal agency that regulates that particular creditor. Your complaint letter should state the facts. Send it, along with copies (NOT originals) of supporting documents. You also may want to contact an attorney. You have the right to sue a creditor who violates the ECOA.

Do You Need Credit or Insurance?

Your credit score helps determine what you’ll pay for credit or insurance.

Ever wonder how a lender decides whether to grant you credit? For years, creditors have been using credit scoring systems to determine if you’d be a good risk for credit cards, auto loans, and mortgages. These days, many more types of businesses — including insurance companies and phone companies — are using credit scores to decide whether to approve you for a loan or service and on what terms. Auto and homeowners insurance companies are among the businesses that are using credit scores to help decide if you’d be a good risk for insurance. A higher credit score means you are likely less of a risk, and in turn, means you will be more likely to get credit or insurance — or pay less for it.

What is credit scoring?

Credit scoring is a system creditors use to help determine whether to give you credit. It also may be used to help decide the terms you are offered or the rate you will pay for the loan.

Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, whether you pay your bills by the date they’re due, collection actions, outstanding debt, and the age of your accounts, is collected from your credit report. Using a statistical program, creditors compare this information to the loan repayment history of consumers with similar profiles. For example, a credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points — a credit score — helps predict how creditworthy you are — how likely it is that you will repay a loan and make the payments when they’re due.

Some insurance companies also use credit report information, along with other factors, to help predict your likelihood of filing an insurance claim and the amount of the claim. They may consider these factors when they decide whether to grant you insurance and the amount of the premium they charge. The credit scores insurance companies use sometimes are called “insurance scores” or “credit-based insurance scores.”

Credit scores and credit reports

Your credit report is a key part of many credit scoring systems. That’s why it is critical to make sure your credit report is accurate. Federal law gives you the right to get a free copy of your credit reports from each of the three national consumer reporting companies once every 12 months.

The Fair Credit Reporting Act (FCRA) also gives you the right to get your credit score from the national consumer reporting companies. They are allowed to charge a reasonable fee, generally around $8, for the score. When you buy your score, often you get information on how you can improve it.

To order your free annual report from one or all the national consumer reporting companies, and to purchase your credit score, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281

How is a credit scoring system developed?

To develop a credit scoring system or model, a creditor or insurance company selects a random sample of its customers, or a sample of similar customers, and analyzes it statistically to identify characteristics that relate to risk. Each of the characteristics then is assigned a weight based on how strong a predictor it is of who would be a good risk. Each company may use its own scoring model, different scoring models for different types of credit or insurance, or a generic model developed by a scoring company.

Under the Equal Credit Opportunity Act (ECOA), a creditor’s scoring system may not use certain characteristics — for example, race, sex, marital status, national origin, or religion — as factors. The law allows creditors to use age in properly designed scoring systems. But any credit scoring system that includes age must give equal treatment to elderly applicants.

What can I do to improve my score?

Credit scoring systems are complex and vary among creditors or insurance companies and for different types of credit or insurance. If one factor changes, your score may change — but improvement generally depends on how that factor relates to others the system considers. Only the business using the scoring knows what might improve your score under the particular model they use to evaluate your application.

Nevertheless, scoring models usually consider the following types of information in your credit report to help compute your credit score:

Have you paid your bills on time? You can count on payment history to be a significant factor. If your credit report indicates that you have paid bills late, had an account referred to collections, or declared bankruptcy, it is likely to affect your score negatively.

Are you maxed out? Many scoring systems evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it’s likely to have a negative effect on your score.

How long have you had credit? Generally, scoring systems consider the length of your credit track record. An insufficient credit history may affect your score negatively, but factors like timely payments and low balances can offset that.

Have you applied for new credit lately? Many scoring systems consider whether you have applied for credit recently by looking at “inquiries” on your credit report. If you have applied for too many new accounts recently, it could have a negative effect on your score. Every inquiry isn’t counted: for example, inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not considered liabilities.

How many credit accounts do you have and what kinds of accounts are they? Although it is generally considered a plus to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many scoring systems consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may have a negative effect on your credit score.

Scoring models may be based on more than the information in your credit report. When you are applying for a mortgage loan, for example, the system may consider the amount of your down payment, your total debt, and your income, among other things.

Improving your score significantly is likely to take some time, but it can be done. To improve your credit score under most systems, focus on paying your bills in a timely way, paying down any outstanding balances, and staying away from new debt.

Are credit scoring systems reliable?

Credit scoring systems enable creditors or insurance companies to evaluate millions of applicants consistently on many different characteristics. To be statistically valid, these systems must be based on a big enough sample. They generally vary among businesses that use them.

Properly designed, credit scoring systems generally enable faster, more accurate, and more impartial decisions than individual people can make. And some creditors design their systems so that some applicants — those with scores not high enough to pass easily or low enough to fail absolutely — are referred to a credit manager who decides whether the company or lender will extend credit. Referrals can result in discussion and negotiation between the credit manager and the would-be borrower.

What if I am denied credit or insurance, or don’t get the terms I want?

If you are denied credit, the ECOA requires that the creditor give you a notice with the specific reasons your application was rejected or the news that you have the right to learn the reasons if you ask within 60 days. Ask the creditor to be specific: Indefinite and vague reasons for denial are illegal. Acceptable reasons might be “your income was low” or “you haven’t been employed long enough.” Unacceptable reasons include “you didn’t meet our minimum standards” or “you didn’t receive enough points on our credit scoring system.”

Sometimes you can be denied credit or insurance — or initially be charged a higher premium — because of information in your credit report. In that case, the FCRA requires the creditor or insurance company to give you the name, address, and phone number of the consumer reporting company that supplied the information. Contact the company to find out what your report said. This information is free if you ask for it within 60 days of being turned down for credit or insurance. The consumer reporting company can tell you what’s in your report; only the creditor or insurance company can tell you why your application was denied.

If a creditor or insurance company says you were denied credit or insurance because you are too near your credit limits on your credit cards, you may want to reapply after paying down your balances. Because credit scores are based on credit report information, a score often changes when the information in the credit report changes.

If you’ve been denied credit or insurance or didn’t get the rate or terms you want, ask questions:

Ask the creditor or insurance company if a credit scoring system was used. If it was, ask what characteristics or factors were used in the system, and how you can improve your application.

If you get the credit or insurance, ask the creditor or insurance company whether you are getting the best rate and terms available. If you’re not, ask why.

If you are denied credit or not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information with the consumer reporting company.