While writing a great CV and preparing for interviews are some of the more important aspects of the job search process, there can also be a handful of other steps that go along with it, for example, pre-employment credit checks.
Pre-employment checks are a part of the recruitment process that’s becoming increasingly common. They’re essentially checks that your potential employer will carry out to make sure a) that you’re who you say you are b) that you’re being truthful about all the other details on your application and c) that you’re suitable for the role.
These checks can include a screening of your social media profiles, a deeper look into the authenticity of your degrees and qualifications, making contact with your provided references, and a criminal record check.
However, one of the most important checks – which many people overlook and can make the difference between you landing a role or getting turned away, is a credit check.
To help demystify the pre-employment credit check process, we’ve put together a list of six things you need to know about pre-employment credit checks.
1. What is a credit check?
A credit check is essentially a closer look at your financial history. It’s mostly used by financial institutions to assess whether or not they’re willing to lend you money. However, other people, such as landlords and potential employers, may want to run credit checks on you too.
A credit check involves generating a credit report, which can show:
- Your electoral registration details, including your name, date of birth, and address
- Whether you have any debts, and if so, how much you owe
- If you meet your regular payments on time or not
- If you’ve had any bankruptcies or insolvencies
- If you’ve had a County Court Judgment (CCJ) filed against you in the last six years (which you can find out more about here)
- If you’ve applied for credit recently
- Your financial associates
It’s important to note, however, that an employer running a credit check on you will not be able to see your full financial history. Employers can only view information from public databases, such as CCJs, bankruptcies, and insolvencies. They can’t view private data, such as your credit card history and financial associates.
What they’ll see will also depend on what credit check service they use. Regardless, they won’t be able to see your credit score (a three-digit number that indicates how reliable you are when it comes to borrowing and paying back the money).
2. Why will a potential employer run a credit check on me?
Although credit checks were once saved for job openings in the financial sector, they’re becoming a more common part of the recruitment process for a wide range of companies and industries.
When performing a credit check on a potential employee, companies are generally looking for one of two things…
Firstly, they’re simply looking to check that you are who you say you are, and they’ll do this by matching the details that you provided with the details in your credit report.
Secondly, they might also check for any history of financial mismanagement. Though this might seem unrelated to your potential job performance, there are a few reasons why employers might want to look into this.
For example, if you have a history of financial mismanagement or are currently in a large amount of debt, your potential employer may believe that you’re more likely to commit fraud or even theft. This can be a particular concern to employers in the financial sector, or if the job you want involves access to or the handling of money.
Some employers also believe that your financial history serves as an indicator as to what sort of person you are. For instance, if you have a history of making payments in full and on time, then a potential employer might be more inclined to believe that you’re an organised and responsible individual.
However, this isn’t an exact science, and ultimately, a credit check boils down to numbers and figures – it doesn’t account for context. Therefore, for most employers outside the financial industry, a pre-employment credit check will simply be used as an identity check and not a judgement of character. So if you have a credit report that’s a bit spotty, try not to be disheartened, as it doesn’t necessarily mean that you won’t get the job.
3. When will an employer run a credit check on me?
When applying for a role in a financial institution or a law firm, your potential employer will often be required by law to run a credit check on you. However, as mentioned earlier, it’s not unusual for other companies and industries to run credit checks on potential employees.
When a potential employer will want to run a credit check on you over the course of the recruitment process (if at all) will be entirely up to them. They have the choice to conduct it just before or after they offer you a job.
However, in order to save time and money, it’s much more common for companies to run credit checks just before making job offers, as this will avoid the awkward possibility of revoking a job offer if the candidate fails.
4. Will a pre-employment credit check affect my credit score?
When people, companies, and institutions run credit checks against you, they’re recorded in your credit report, and in some instances, these can affect your credit score and how your credit report appears. Whether or not a credit check is recorded on your credit report and if it will affect your credit report depends if a soft or hard search is conducted.
However, when it comes to pre-employment credit checks, your potential employer will only run a soft search against you. A soft search will give potential employers a basic idea of your financial situation and will be recorded in your credit history. But only you will be able to see this ‘footprint’ – it will not be visible to other people, companies, and institutions, nor will it affect your credit score.
A hard search, on the other hand, is conducted by lenders and will involve a review of your full credit history (using public and private databases). This is undertaken when you apply for a loan or a mortgage and is visible to other lenders. Multiple hard searches look unfavourable on your credit report as it might signal that you’re in desperate financial difficulty. Successive hard searches can also lower your credit score.
5. How can I see my credit report?
If you’re unsure about what your credit report will tell potential employers about you, there are lots of services online that you can use to run a credit check on yourself, and get a good idea about what your employer might see.
The three major credit scoring agencies in the UK are Experian, Equifax, and TransUnion. These agencies collect data from banks, building societies, and retailers (think Netflix, Spotify, whatever you make regular payments to) in order to generate your credit score and report. Each of these providers not only gives you your credit report but also instructs you on how to understand and interpret it.
While these agencies offer a range of free and paid-for services, you can access your credit score and report for free at Clearscore, which uses Equifax data and offers free identity protection plus help to find credit cards and loans.
6. What can I do to improve my credit report for pre-employment checks?
There are many ways that you can improve your credit score and report, and we highlight the most important in our article Seven steps that could improve your credit score. These include building your credit history using a credit card, making all your repayments on time, and staying within your credit limit.
However, if you’re applying for roles at the moment, you may not have time to improve your credit score – as many times, this is done gradually over a longer period of time. All is not lost though, as there are a few simple steps you can take to make your report look more favourable.
Firstly, you can check if you’re signed up for the electoral roll. When companies run a pre-employment credit check against you, they’ll use your electoral roll registration to confirm who you are and your address.
So, if you’re signed up to the electoral roll (and you should be if you’ve registered to vote), it’s worth making sure that you’re registered under your current address. If your address is outdated, it’s unlikely that this will have any major adverse effects on your job application. But, if the address you signed up to the electoral roll with doesn’t match up with the one you provided your potential employer with, then you might have to explain why and risk coming across as disorganised or dishonest.
An incorrect address might not be the only mistake that appears on your credit report, so it’s always worth checking for others too. Unfortunately, credit reference agencies can make mistakes, which can make your credit report look less favourable and, in turn, make you appear like a less desirable candidate for a potential employer. In fact, a survey conducted by Which? found that one in five people have found an error on their credit report.
There is a range of mistakes and inaccuracies that can appear on your credit report. For instance, if a CCJ has previously been filed against you, but it was since settled in the required time, then it no longer appears on your report or affects your score. However, sometimes the credit rating agencies might not have received confirmation that your CCJ was settled – in which case, you’ll need to get in touch with the court so that they can correct this.
It’s also worth checking for records of missed payments that you paid on time, unrecorded credit history, and, perhaps most importantly, applications for lines of credit that you didn’t make. If you spot any credit applications that weren’t made by you, you could be a victim of identity fraud and should report this immediately to Action Fraud either online or by calling 0300 123 2040. Action Fraud is the UK’s reporting centre for fraud and cybercrime. You can read more about identity fraud on their website here.
Final thoughts…
While being aware of what pre-employment credit checks are and how they’re conducted is important, it’s also worth remembering that employers won’t usually dismiss candidates on less than ideal credit check results – especially if you’re applying for a job outside of the financial and law industries.
However, a good credit check result could be the tiebreaker that convinces an employer to hire you over a similar candidate with a bad credit check result. This means that doing all you can to make sure you have a good credit report and score might be the difference between landing the job you want or not.
To view more steps that you can take to boost your credit score, you might want to check out our article here. Or, for more career advice and job-related content, why not take a look at the work section of our website?