Employers And Your Credit Report

Social media is not the only thing that employers can look at nowadays when conducting background checks on prospective employees. Can an employer pull your credit report as part of the application process? The answer to this question is yes. Why? Many employers simply feel that applicants who are responsible with their own finances would use better judgment, make better decisions and act more responsibly when faced with work related issues.  

Employers also believe that employees who are in good financial shape may be able to give greater effort at work without the added stress of personal financial problems. If your credit report is littered with unpaid bills or other negative issues, it could affect your chances of finding a job or landing that great new opportunity that seems like it was made for you.

So, what should you do if a prospective employer asks to see your credit report? The key is to make sure that things are in order before you start your job search and monitor your credit report for any changes that may occur. Here are a few tips that you can follow:

• Be Prepared - Get A Head Start On Prospective Employers - Check your credit report and score for any errors or negative issues that can have an effect on your credit standing. If you are actively job searching, consider having this as one of the first tasks on your list. If you wait until you are asked to see your credit report, you may risk not having time to review it to correct any problems before the employer gets a copy.

• Fix Any Mistakes ASAP - If you find any mistakes, no matter how insignificant they may seem, consider contacting the credit bureaus and follow the procedures to have them fixed or removed. This may require a written statement and other documentation that prove that the information contained in the credit report is inaccurate.

• Add A Statement Of Explanation Or Dispute For Negative Items - If your credit was affected due to an illness, death, extended layoff, identity theft or any other extenuating or extraordinary circumstance, you are permitted to add a short written statement to your credit report explaining the situation, and the reason for the negative information.

• Agree To The Credit Check And Be Prepared To Answer Any Questions - Once you have gone through your credit reports and corrected any issues or added explanations, you can begin your job search with confidence that you have done all that you can to present your credit history accurately. Try not to deny access to your credit reports if a prospective employer asks for it, as this could raise a red flag. You will now be better prepared to answer any questions that may arise concerning your credit report.

By keeping on top of your credit report and score, you can be reasonably sure that you’ll have no surprises if your credit report is reviewed by an employer. The use of a credit monitoring service can help you by providing you with your three bureau credit reports and alerts to any changes in your credit reports and scores.

Is My Credit Score High Enough To Buy A House?

What credit score number do you need to buy a house? Everyone wants to know the magic answer to this question. Home buyers are concerned about their credit score because they know that their score carries a lot of weight when it comes to getting approved for a mortgage for a new home. The problem is that the complicated scoring system can make credit scores confusing, and the more you try to research scores, the more confused you can get.

Here’s what you really need to know. Your credit score is a numerical representation of the information in your credit report, which shows how you have borrowed and repaid money going back up to 10 years. Scores take into account five main financial factors:

1. Your payment history on loans and credit cards
2. The total amount you currently owe on all of your accounts
3. The length of your credit history (how long you have been borrowing)
4. Any new, recently opened accounts
5. The mix of credit you use (credit cards, auto loans, etc.).

Scores can vary depending on which bureau they’re coming from. There are three main bureaus: Experian, TransUnion and Equifax. Mortgage lenders can use data about a home buyer from any of the bureaus, along with proprietary formulas and other factors (like debt to income ratio) to assess risk- or in other words, to determine an applicant’s likelihood of paying back a loan.

Applicants with lower credit scores have a statistically higher probability of defaulting on their loans, and may be viewed as a higher risk to lenders. Those with higher credit scores may be viewed as lower risk to a lender. Their high score shows that they have been responsible with paying off their bills in the past. Applicants with lower scores may have a harder time getting approved for mortgages, but if they do get approved with their low score, they may end up paying more in interest. In a search for a home, it can pay to have good credit. Borrowers with better credit scores tend to pay lower interest rates.

There is no across-the-board requirement of a credit score for mortgage approval. Lenders each have their own formulas; some set the bar higher than others, and some are willing to work with buyers with lower scores.

Late payments can seriously lower a home buyer’s credit score, so it is important to make your payments on time. Overuse of credit cards (the amount of credit you use compared to the amount of credit available to you) can also lower one’s score. If your credit cards are maxed out, this may be seen as a higher risk to lenders. Consider checking your credit report at the onset of your home search to know where you stand in the eyes of a lender.

Common Credit Mistakes (and How to Avoid Them)

Common Credit Mistakes
Your credit score can determine whether or not you get approved for a credit card, mortgage or auto loan. It can also be used to determine whether or not you can rent an apartment or even get a job. The importance of your credit score doesn’t stop there though; it also can impact how much you’ll pay on utility deposits, more importantly, interest rates.   

There are different scoring systems, but for all scores, higher equals better. With a higher score, you may be more easily approved for credit and will get the best interest rates available. 

So how do you know how to keep a good credit score? Consider avoiding these common credit mistakes: 
  • Carrying large balances: Keeping your balances as low as possible increases your credit utilization ratio, the percentage of your credit limit that you use. The amount you currently owe on accounts can make up to 30 percent of your credit score.  
  • Closing credit cards: You might think closing credit cards you don’t use anymore is the responsible thing to, but your score can actually be hurt by closing accounts. This is because when you close an account, you lower the amount of credit available to you. Remember your credit utilization ratio from above? It is ideal to have credit available to you, but not be using too much of it. 
  • Making late payments: About 35 percent of your score is related to your payment history. Late payments on credit cards, loans or other bills could lower your score if those late payments are reported to the credit bureaus. 
  • Defaulting: Failing to pay back the amount you owe on a loan or credit card can seriously impact your score. Bankruptcies and foreclosures are considered the most serious.  
  • Opening too many new lines of credit: Each time you apply for a credit card or loan, an inquiry into your credit history is made. This may negatively impact your credit score.  Opening multiple credit cards or loans is a red flag; it may signal that you are in financial distress and/or at risk of becoming overextended.  Having multiple new accounts can also negatively impact your credit score. 
  • Not having a credit card: You may think paying all cash all the time is the best thing to improve your credit, but if you have no credit cards, then you have no credit history. You are considered “un-scoreable” because there isn’t enough information to calculate a score. With no score, you may appear risky to lenders. If you have an auto loan but no credit card, you may still benefit from a credit card, as that could help diversify your credit file. The mix of your credit history accounts for 10% of your score. 
Avoiding as many of these mistakes as possible and maintaining responsible spending and saving habits can help set you on the path to achieving your financial goals.  

Check Your Credit Report - Credit Report Inquiries Explained

There seems to be a great deal of confusion when it comes to credit inquiries on credit reports. Many people erroneously believe that all inquiries that are made into their credit reports are universally reported, and have a detrimental effect on their credit scores. Luckily, this is not the case and we’re going to shed some light on this important subject. This subject is one that has kept many people from checking their own credit reports for fear of hurting their credit scores.

The Q&A on Credit Report Inquiries:

What Is A Credit Inquiry?

A credit inquiry is a record of a request to view your credit file. Any time your credit file is accessed, whether by a creditor looking to extend credit to you or by an insurance company or employer looking into your financial record for business purposes, an inquiry is recorded. However, not all of these inquiries are treated in the same way, nor are they all visible to any party that pulls a copy of your credit report.

Who Can Make An Inquiry Into My Credit Report?

According to the Fair Credit Reporting Act, only businesses with a “permissible purpose” may view your credit report. Other than individuals or businesses that fit into this general definition, only you and those that you have given written permission may pull your credit report. These may include employers, landlords, government agencies and other businesses that may need to check your credit report for internal purposes, licensing, and legal issues.

Are All Inquiries Reported In The Same Way?

Not all inquiries are reported in the same way.

 There are two types of inquiries that are recorded by the credit reporting bureaus:

1. Hard Inquiries –These are inquiries that are made into your credit report as a result of your application for credit for things such as auto loans, credit cards, mortgages, personal loans or other types of credit extensions. These inquiries are recorded on your credit report and remain there for two years. These can be viewed by any other party that pulls your credit report within that time frame.

2. Soft Inquiries –These are inquiries that are made into your credit report by you, or another party to whom you have given permission, as part of an information gathering process or for reasons other than extension of credit. These are inquiries done by you, a prospective employer, insurance company, landlord or government agency or any other non-creditor. These types of inquiries are visible only to you, and are not reported to those who pull your credit report as part of a credit application process.

How Do These Inquiries Affect My Credit Score?

Soft credit inquiries have no effect on your credit score. Several hard credit inquiries in a short period of time may adversely affect your credit score. This is due to the way that scoring models work along with the presumption that consumers who apply for a great deal of credit within a small time-frame may be in a less than optimal financial position. There are exceptions to this rule, mainly in the case of shopping for mortgage rates where a high number of credit inquiries that fall within a short date window. This usually happens up to 45 days, and these are recorded as a single inquiry on a credit report, so as not to penalize a consumer for “shopping around for the best rate”.

Does Credit Monitoring Affect My Credit Score?

Inquiries made by a credit monitoring service are treated in the same way as your own inquiries into your credit report. They have no effect on your credit score. This is a good reason to consider using a credit monitoring service to check your credit file for any changes or to alert you to a high number of inquiries in a short period of time. This is a very good early indicator of identity theft as any party that has stolen your information may attempt to open many credit accounts in your name.

5 Reasons To Monitor Your Credit Reports

It’s no secret that one of the best ways to maintain your credit status and avoid potential problems with your credit is to continually check for inaccuracies and irregularities that may exist in your credit reports. Routine checks of your credit reports and your monthly credit card statements can go a long way to help prevent any errors or unusual activity from affecting your credit score

Let’s face the facts-- with the complexities of today’s financial networks; we’re all at risk of various types of fraud which could result in adverse effects on our credit scores. We do our best to keep close possession of credit cards and IDs with the notion that “as long as no other person has my cards or information, I’m safe”. Unfortunately, this can give us a false sense of security since a great deal of personal information gathering and financial theft now occurs through electronic means. 

Invalid reporting is another issue that can hurt your credit. This particular problem occurs more frequently than was once thought. Errors can remain on a credit report for years, as many people don’t think to review their credit information until they’re ready to commit to a large purchase like buying a house or car. It’s at this critical time that they may discover a wrong address or an old collection notice and then face the daunting task of scrambling to repair the damage before it has an effect on their long term plans.

One of the keys to protecting your credit is the ability to identify errors or fraudulent activity before they translate into credit problems; or perhaps worse, a case of identity theft. By keeping a close eye on all 3 credit reports (Equifax, Experian and Transunion), you can detect these and other issues early and take the necessary steps to resolve them before they become major problems. The use of an effective credit monitoring service can make checking and monitoring your credit easy and effective, since activity is reported almost immediately.

Why you should continually monitor your credit report and credit score:

1. Early detection of identity theft and credit fraud. While checking your monthly statements for unauthorized charges is good basic practice, it is not sufficient to counter all of the new tactics that are being used by identity thieves. By monitoring your credit report on a constant basis, you can identify any new accounts that may have been opened, see any new addresses that may have been set up or view any accounts that may have collections against them without your knowledge. These issues alone are reason enough for you to begin monitoring your credit reports. 

2. Inaccuracies on your credit report. Genuine mistakes can be listed on credit reports. Credit records are accessed, reviewed, updated and reported every day. This sheer volume of activity lends itself to reporting errors resulting from computer software issues, keypunch errors or simple mix ups of files between persons with similar names or addresses. Unfortunately, some of these errors can be significant and may lead to denial of credit or higher risk assessment and therefore higher interest rates on various types of loans.

3. Monitor fluctuations in your credit score. Credit scores normally fluctuate in small increments over the course of weeks or months. However, if you see your credit score move dramatically in a short period of time and you haven’t had any noteworthy activity that would warrant such a change, it could be due to an attempt or incidence of identity theft.

4. Protection of your financial future. Knowledge is power. Try to have a thorough understanding of your credit situation and activity at all times. The ability to recognize an issue and take immediate action can mean the difference between stopping a problem before it ever starts or the need to deal with a major problem several months down the road after your credit has been affected. Don’t let small problems progress to a critical stage.

5. Monitoring your credit doesn't hurt you. Checking your own credit reports or monitoring your own credit score is important. These types of “inquiries” (soft inquiries) don’t necessarily directly affect your credit history or credit. 

For all of these reasons and others, consider having a plan for monitoring your credit regularly. Active credit monitoring is a helpful way to keep track of your credit profile. Making use of a credit monitoring service can help protect your credit status and give you some peace of mind. 

Get The Job, Not A Stolen Identity

If you've been on the job hunt for a while, you can probably fill out job applications in your sleep. Name, date of birth, phone number, email address, social security number, and previous employment history seem to be the most easy to answer questions . However, the information you're giving out may lead to more than just a potential job, it could also lead to identity theft.

Here are a few tips for keeping your identity safe while seeking employment:

• Only give out limited personal information. While companies may ask for your date of birth and social security number on an application, according to one source, you don't have to share this personal information until after you've received a job offer.  Also, you should try to remember to always hand back any paper applications to the human resource department or hiring manager, not just any company employee.

• Do your homework. Online job posting sites are great when they are legitimate, but there are plenty of scammers who post fake job listings. If you are asked for your bank account number, a background check or a copy of your bills before meeting your potential employer in person, you should proceed with caution. Similarly, before applying for any jobs, you should your research to make sure the business has a website that's easy to locate, physical address, phone number and license. 

• Stay safe online. If you do apply for a job online, make sure your Internet connection and the site itself are secure. You can tell if a site is secure by looking for the “https” or a tiny lock icon in the URL. You can also create a separate email address and/or invest in a temporary cell phone, that way your identity stays safe from any phishing scams.

• Keep a record. Always keep a record of which jobs you have applied for and on what sites. Some scammers will contact you saying they saw your resume on a site that you have actually never posted your information to. And, even if you did post your resume on that site, as mentioned above, you should do your homework on the business to make sure they are legitimate.

Job hunting can be a grueling, time consuming process without the added frustration of having your identity stolen. If you choose to follow our tips in being extra careful while finding a new job, you should enroll in our Identity Theft Protection service so that you can keep tabs on your identity at all times! 

How Your Friends List Can Impact Your Ability To Get Credit

Have you ever thought who you choose as a Twitter or Facebook friend could have an impact on your ability to get a loan for a home or new car? Well, it might.

Lenders are testing the waters on using social networks and other data you may have never even considered to determine whether or not to loan someone money. Lenders traditionally use your credit information along with income information (verification of income from W2's and pay stubs), savings information (like checking and savings account statements) and tax returns to determine an applicant’s risk. 

But, one lending institution in Germany has found that social network connections can play a part in indicating one’s credit worthiness.   

These companies believe that humans are pretty good at determining how trustworthy a person is. Assessing peoples’ social network connections can give the company insight into whether or not that person will pay their own bills on time. What does that mean? If you’re friends with someone who owes that lender money, you may have a harder time getting a loan yourself (especially if that person is someone you interact with frequently). 

In addition to your social networks, one company in Germany is also pulling data from applicants’ accounts and from the manner in which a customer completes an online loan application. For example, the amount of time spent reading information about the loan and whether or not you complete the application from your work or home computer. Or whether you use all capitalized letters (or all lowercase letters) are all taken into account to paint a more complete picture of an applicant. 

One lender that makes cash advances to small businesses takes into account the business’ presence on social media sites on the principle that a business that pays attention to Facebook and Twitter as a way to handle customer service is more likely to be responsible in other areas of their business, including accounting. 

While these types of screening activities may be less frequent at this time (the vast majority of lenders are not yet checking up on you on Facebook when you apply for a loan), it may represent the future of lending requirements.  Lenders may start looking at data outside of your credit report to assess your creditworthiness. This could be good news for people with no credit or with low credit scores because of a short credit history

The downside of course is that our social networking activities are not entirely indicative of our behavior as consumers or borrowers. We may all be punished by being Facebook friends with friends or family members who aren't financially responsible (we all have friends and family who aren't always at the top of their financial game).  People could also easily clean up their friend lists to appear more clean-cut, but may have a hard time doing the same to their credit score

Either way, this can also serve as a good reminder to be careful about what you post on your social networks. Your online activities are already being watched by potential employers-- it wouldn't be much of a stretch for lenders to start doing the same in the near future. 

3 Credit Checking Benefits

Many people never bother to check their credit history regularly. They may only discover problems with their credit report when they’re denied a major loan by a lending company or if their application for a credit card is rejected by a bank.

Performing accurate and regular credit checks may help you avoid such headaches and may be beneficial to your overall financial health in the long run.

Here are some of the benefits:

1. Better credit score: As you may already know, lenders or creditors look at factors like income and credit score to determine an individual’s creditworthiness. It helps them decide whether they should extend credit to a particular person or not. The higher a person’s credit score, the better their chances of getting extended credit are. Credit scores can be dependent on several things including the age of the credit report, the types of inquiries made by institutions about the report, and the diversity of credit accounts on the report. 

Keeping pace with your credit report can have a considerable effect on your financial stability. By ensuring that you have a good credit score, you can take advantage of many credit services including home mortgages, car loans, and low-interest credit cards — financial options which may not be easily available to you if you have a bad credit history.

2. Discovering errors in your credit report: Because credit reporting agencies handle numerous reports each year, clerical errors and glitches in computer systems may happen. These inaccuracies could harm your credit rating, so it’s better to discover them early so that you can have them rectified by the agency concerned.

3. Detecting identity theft: Identity theft can happen when a criminal opens accounts in your name and accumulates balances over time, leaving you to deal with debt collectors’ demanding payment for loans you never owed. Checking your credit report regularly can help you detect these fraudulent activities arising from identity theft. If you suspect identity theft, you can ask your agency to flag your report with a fraud alert.

Credit reports are easily available from credit reporting agencies. Some of them allow consumers to see the reports directly from their official websites, while others sell copies for a reasonable cost.