If you know your resume and cover letters are stellar and you perform well in job interviews, but you still fall short of your goal of being hired in your chosen profession, your credit score / credit report could be holding back. This is because employers view your credit score as a measure of how well you meet all the financial promises you made to lenders. It is a known fact that employers want employees with integrity, character, and enough soft skills to fit in well with the employer’s existing team. That adds to a wealth of industry experience. You could also be held up by the results of a criminal background check, but you would normally know if that was the case.
The average credit score in the US is 705. Excellent credit is any score above 739. If your goal is to get a job in a profession that pays well, you should be aware that every job application you complete normally authorizes Employers to verify your employment history, references, background and credit report. Positions with more responsibility and higher compensation automatically require a more extensive background check, credit check, and criminal background check. If the final two or three candidates are equal, the results of a background check, credit check, or criminal background check often make hiring decisions easier for the employer.
Here are the best ways to improve your credit score:
- Always pay all your bills on time, or preferably sooner. This is the highest weighted factor in calculating your credit score.
- Start an automated savings plan so that you pay yourself first each month and live with the rest. This can be done by setting up automatic deductions from your paycheck to your 401K / IRA / 403B, etc. or use the automated bill payment service with your online banking to contribute to a savings or retirement account each month. People with the discipline of keeping six months of living expenses in a savings account can usually maintain excellent credit and make better financial decisions.
- Keep your credit utilization rate below 30% vs. your credit limits; if possible, at a credit utilization rate of 10% vs. your credit limits are ideal.
- In many cases, especially if you have high-interest consumer debt, you can use your home equity for a debt consolidation loan (pay off the debt with a cash refinance / home equity loan). In many cases, this will dramatically improve your credit score, but you must have the discipline to keep credit card balances at zero by paying off your consumer debt each month.
- Do not close the credit cards / lines of credit that you canceled, even if you will no longer use them. The more open credit you have and the lower your balance, the better your score. The older your open lines of credit, the better it will be for you (stability).
- Maintain stability in your job, profession, and home. Frequent changes in your profession, job or address often lead to financial hardship / unemployment because without stability you are a less desirable candidate for credit or employment.
- Work part-time at night or on weekends to pay off your debts faster. Pay off debt with the highest interest rates first for maximum impact.
- If you have had financial difficulties and have the debts to prove it, write and ask your creditors to agree to delete your record of late payments in exchange for paying your debt in full. Let them know that if they do not agree to this in writing, you will have to focus your repayment efforts on other creditors who are friendlier because their resources are so limited.
- Carefully analyze your credit records from each of the three credit bureaus because there may be mistakes that are holding your score down. These errors can be as small as old late payments that are still on your credit history even though they are more than seven years old. Carefully follow the instructions to dispute credit report errors. Each agency has its own policies and procedures. I recommend that you use certified mail, return receipt requested on all correspondence, so that you have official proof of delivery. If one of your creditors does not respond within a reasonable time, you will automatically win your dispute.
- Avoid bankruptcy whenever possible, including reorganizing debts, because both are a public admission that you are financially inept. Everyone knows that lawyers are expensive, and frankly, you could use that money to pay off your debt and get a second job to speed up the process of paying off your debts. The habitual debts of consumers with late payments will automatically lower your credit history after seven years. A bankruptcy stays on your credit report under public records for ten years, and many employers prefer not to hire candidates who have filed for bankruptcy.
- Do your best to get a promotion or a raise at work, which will help you pay off your debts faster. If you are behind for one, present your boss with an irresistible written proposal to make your raise or promotion come true.
- Hire a CPR or Tax Accountant to maximize all your income tax deductions. Yes, they are worth it because they usually generate more savings than their fees and you will learn from them!
- Hire a certified professional resume writer if you think you’re underpaid or ready to move on and test the job market in your spare time. Employers highly prefer passive candidates and, in many cases, pay for them.
- Get married, find a great roommate, or rent a room in your home to a college student, artist, or professional to lower your monthly living expenses.
- Whenever possible, use public transportation instead of owning a vehicle and paying for car insurance. The cost savings are staggering, especially if you have to pay to park regularly.
- Improve your education or skill set whenever possible, that way you will be in more demand in the event of a layoff and advance / receive pay raises faster.
- Ideally, it is beneficial to have two credit cards, a car loan / bank loan, and a mortgage because it shows that you are responsible enough to have three main types of credit.
- Resist the urge to splurge! Train yourself to be a saver and not a spender by repeating this mantra: “Use it, spend it, make it work, or do without.”
- Request a free copy of your annual credit report each year from each of the major credit bureaus. Search “Annual Credit Report” with Google for the only online source of free consumer credit reports from the three federal credit reporting agencies.
- If any of your creditors have not reported your payment history on time, write to them and ask them to report your good payment history to at least one of the major credit bureaus.
- Use your checking account’s online bill pay feature to set up automatic monthly / bi-monthly payments for all your debts. In this way you will not forget if you have a car accident, mishap, long vacations or are hospitalized. An ounce of prevention is worth a pound of cure.
- Have some type of Hospitalization insurance in case of being hospitalized for an illness, injury or ailment. AFLAC has several consumer-friendly insurance options, including one that pays you an admission while you are hospitalized.
- Avoid Divorce If humanly possible, a healthy percentage of couples actually end up loving each other again after a separation. If you must get divorced, I recommend using divorce mediators rather than divorce attorneys because you will benefit from a friendlier process, a more beneficial divorce settlement, and significant cost savings.
- Avoid co-signing auto loans, student loans, personal / business loans, or home loans / home equity loans for friends or family.