Are Credit Scores Important to Employers and Landlords?
Landlords and employers sometimes use a person’s credit score in determining their suitability, but they cannot access it without your permission. Nor can they rely on it as the sole factor in making their decision about you. The fact is however, that refusing to allow a landlord or employer access to your credit rating could make their decision for them. Let’s take a closer look at why credit scores are important to employers and landlords.
Are Credit Scores Overrated by Employers and Landlords?
As if job seekers don’t have enough to worry about during their job search, some employers now implement credit checks in making their employment decisions. This is not exactly what a person seeking employment needs, especially if they have been out of work for some time. Most likely they will have struggled to pay bills on time, and so their most recent credit history will contain damaging information.
This is the sort of situation that raises the question of whether credit scores are overrated by employers and landlords. The truth is that, although an employer or landlord cannot view your credit score unless you give them permission, failing to do so might lead them to believe you have something to hide. Of course that is not a completely fair assessment, but some employers feel a person with outstanding debts or checkered credit history may be unreliable or even prone to theft.
The good thing for applicants however is that employers must tell you if your credit score is used in their decision not to hire you. Of course they could simply say that it wasn’t, so the applicant is at a severe disadvantage. The only way to protect yourself against having your credit score used against you is to make sure you have the best credit score you can get. Before you apply for any jobs or new accommodation, order a copy of your credit report to see what it contains.
Sometimes a credit report may contain errors or inaccurate information which can hurt your credit score unnecessarily. Even if your credit report is accurate, you can look for outstanding bills or overdue accounts. Simply paying off those accounts will go a long way to raising your credit score in a relatively short time. In a matter of months it is possible to raise your credit score by as much as 100 points just by clearing debts and errors. It is best to ensure you have the best credit score you can get before applying for any job or new accommodation.
Understanding How a Credit Score is Calculated
An increasing number of consumers are becoming interested in how a credit score is calculated. Since the financial crisis of 2007, more and more people have been made aware of the importance of their credit rating and history, especially those who have been denied loans or credit cards because of poor credit scores. Knowing your credit score is the first step to improving it. The next step is to understand how a credit score is calculated.
A credit score is determined by considering five different aspects of an individual’s financial history. Different percentages of those financial behaviors are then used to calculate their credit score. Those five factors and what percentage of them is used in calculating your credit rating are:
• Payment History – 35%
• Amounts Owed – 30%
• Length of Credit History – 15%
• New Credit – 10%
• Types of Credit Used – 10%
Although the above percentages are founded on the importance of the corresponding categories for the entire population, each may hold a greater measure of importance regarding an individual’s score. For instance, the credit history of an 18 or 20 year old may not be factored as much in calculating their score as they have not had a chance to develop a payment history.
Can You Get Credit Scores Online?
The truth of the matter is, you can get credit scores online, but they are not official credit scores. The only way you can get your official credit score is to order it from one of the major credit reporting agencies - Equifax, Experian, or TransUnion. First however you need to order your credit report, which you can do for free once a year. After receiving your credit report in the mail, you can then request your credit score, which you will have to pay for. The credit scores you will find online are basically an estimate of your actual score, and they are not always accurate.
It is important to find out what your credit score is, especially if you plan to apply for a loan or a credit card. Not only does your credit score determine whether your application will be approved, but lenders use it to determine how much interest they will charge you. Those with the best credit scores will receive lower interest rates than those with lower scores. This is simply because creditors view those with low credit scores as a higher risk.