Addicted to credit cards? Think one extra purchase on the Internet won't ever catch up to you? Think again. More and more companies are reviewing credit histories when considering job applicants.
Everyone has probably seen the commercial. The careless young adult sitting in a living room of extravagant material abundance, not least of which is an entertainment system way beyond most college students' meager means. Then, object by object, the plenty that was this youth's bachelor pad dematerializes down to the very plush couch on which he lounges.
This twenty-something version of Everyman is then left on the cold, carpet-less floor of his now empty apartment, a victim of his own misguided credit card euphoria. All this to say that your stuff can, and will, be repossessed if you fall into the easy credit, phantom money trap.
"Credit cards encourage impulse buying and overspending -- we stick our heads in the sand when [the] bills arrive," Commerce School Lecturer Karin Bonding said
If this public service announcement does not particularly concern you, or if you cannot conceive of plunging into so deep a hole as our hero, perhaps this will: Credit card debt, and the subsequent bad credit rating, can affect your future employment. Employers frequently look up credit ratings while considering potential employees.
More and more companies are factoring credit history into their selection process and will not hire applicants if they have less than favorable credit history.
According to the Website of Avert Inc., a national corporation that caters to many companies by performing complete background checks on job applicants, "One out of seven applicants screened had a credit record showing a judgement, lien or bankruptcy."
Bonding pointed out that "more than 1.4 million -- a record number -- [of] bankruptcies were declared in 1997."
Through one of their many services called Credit Link, Avert specifically addresses employers concerns about embezzlement and employee theft. For example, the above statistic suggests to employers that they should take advantage of this option "if your employees will have access to cash, expensive equipment or other people's property as part of the job".
Bonding said statistics show that the average employee spends 6 percent of his time resolving personal matters while on the job. That's 6 percent of the time not doing his job because of the necessity of making financially pertinent calls during business hours. A fiscally responsible candidate is therefore less likely to waste valuable company time.
Potential employers check out records just as one would research a mutual fund. They ask questions like "What kind of risk is involved?," or "Does the past point to future success?". "You need to think of yourself as an investment," says Bonding. No one wants to come across as risky.
But wait -- there's more. Hooking up a telephone, obtaining a loan for that shiny new SUV, renting an apartment, getting an insurance policy, and eventually getting a mortgage all are complicated or made impossible by a bad credit history.
Still not concerned? Well consider this: as much as 50 percent of all credit reports are incorrect. This means all of us, down to the ones among us who actually know how to balance a checkbook, could be in trouble. Addresses, social security numbers, and even names can be confused and cause misinformation. Data entry is not an exact science. Thus the necessity for knowing your standing, even if you have been consistently conscientious.
Banks, creditors, landlords and employers all fall under the heading of those with legitimate business needs and therefore have the right to peruse your credit history.
But the important thing to remember is that you, too, have a legal right to know what is in your report and to make sure it is complete and accurate. You are protected under the 1996 Fair Credit Reporting Act, enforced by the Federal Trade Commission. Under this law you are entitled not only to a copy of your complete report, but also to a list of everyone else who recently has seen it. If you then dispute its accuracy, the agency that provided the report is legally obligated to investigate.
Credit reports are maintained by Consumer Reporting Agencies, private agencies that sell this information to banks and potential employers. Experian, Equifax and TransUnion are the three major CRAs. More than one agency may have a customer on file, and reports can vary from one agency to the next. Calling around to find out who has you on file may be a good way to check on your current credit standing.
"We encourage consumers to get a copy of their report every year and take a look at it," said Experian's Director of Public Relations Donald Gerard.
You'll need to call and talk to a representative in order contest the completeness and/or accuracy of your file. Usually, the company will then direct you as to what documentary evidence they will need, such as photocopied invoices with relevant sections highlighted. If the contested information is then proven to be inaccurate it must be corrected and/or deleted from the file. Additionally, anyone who received this misinformation must be informed of the correction. And if you're still not satisfied, you have the ability to sue for damages.
There is a small cost involved in requesting a report, usually around eight dollars, for which there are exemptions. For example, you will not have to pay if you have been recently denied something where information included in a report was used as a factor. In this situation contact the CRA, which provided the information that led to the denial, within the next 60 days.
Remember you want to be sound investment with an impressive past and lots of potential for future growth.
"Credit history should be taken very seriously. It takes a long time to build up a good one and the benefits are many," Gerard said.
When The Cavalier Daily approached random University students about this matter, some were surprised that potential employers can use credit history as a hiring factor.
"It doesn't seem ethical to look up someone's credit history," said third-year College student Lynn Russell. "Spending habits don't relate to job performance"
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