Many Americans may be fully aware of the ways in which their credit standings can affect a number of aspects of their lives, but one area in which they might not consider their ratings having such an impact can actually be vital to significant financial health.
The ability to have a full-time job, or any kind of employment, is typically vital to a borrower's ability to have ongoing healthy credit, but in many cases, their ability to obtain this kind of position can hinge heavily on their credit standings. In fact, the vast majority of employers now say that they make the checking of applicants' credit reports a regular and important part of the hiring process. In general, it's believed that by assessing these documents for all people who apply for a position, they can weed out less trustworthy candidates by identifying those who have mishandled their credit histories in the past.
However, it should be noted that many consumer advocates say this practice is unfair, insofar as it tends to be harmful to those who have already had financial difficulties. That means that people who might have fallen behind on their credit in recent months as a result of a lack of employment could, theoretically, have more difficulties in obtaining gainful employment specifically because of those problems, which only serves to create a vicious cycle of serious problems both affording credit and not being able to find a job to help them afford paying down their debts. This problem is so widespread that a number of states have, in fact, outlawed employers from engaging in the practice as part of the hiring process.
That, of course, doesn't help those consumers who live in states where the practice is still legal, and as such, it might be vital for those who are applying for a job to take the time to do a little routine credit repair ahead of sending in an application.
How can applicants make sure they're in good standing?
There are two credit score components that can be the easiest to deal with when it comes to a relatively quick credit repair process, and the good news for those going through it is that they also make up the two largest parts of a score to begin with. Together, they combine to account for 65 percent of a borrower's standing.
First, payment history makes up 35 percent of such a score, and is also by far the easiest aspect of such a rating to understand. The best way to ensure this portion is as high as it possibly can be is to simply avoid missing payment deadlines listed on bills and statements for all accounts, every month. Obviously, that can be easier said than done, because financial difficulties can crop up for most borrowers at any time. However, it's vital to maintaining a strong credit rating that the best efforts at dealing with bills on time and in full are made every month, because the damage caused by even one missed deadline, regardless of whether it's by a day or a week, can be appreciable, sending a score tumbling potentially hundreds of points.
Unfortunately for these people, the damage done as a result of a missed payment cannot be corrected, necessarily, but rather just smoothed over by several months or more of on-time payments in the wake of such a mistake. This will help to show lenders — and potential employers — that the incident was isolated, and not likely to be repeated.
What other steps can be taken?
The second-most important aspect of a credit score, which makes up another 30 percent, is the amount of debt borrowers carry versus their total allowable credit limits, as a percentage. In general, consumers can max out this portion of their scores by keeping balances to about 30 percent of their limits or less, but any more than that will begin to necessarily deteriorate their standings. For those who are already well over that limit, taking the time to make larger on-time payments or discontinue spending on credit cards, so that debt shrinks to the point it's below that 30 percent threshold, can have a significant positive impact on borrowers' credit standing going forward.
Finally, if potential employers are checking a person's credit report, so too should that jobseeker do the same. By taking the time to order and carefully review these documents, consumers can ensure there are no unfair markings dragging down what should otherwise be a perfectly good credit score. If any such entries are discovered, it might be wise for borrowers to work with a credit repair law firm, as this may be able to help them put their issues behind them in a manner that's more expedient than they might have been able to achieve on their own.