Whether you are just starting your professional life, or a mid-career veteran planning to switch jobs, you need to understand the importance of maintaining a healthy FICO Score.
Unfortunately, for otherwise qualified candidates, FICO Score’s are fast becoming an increasingly important benchmark in assessing a persons candidacy for a new job.
For years, insurance companies have maintained data suggesting that people with lower credit scores had more frequent, and higher cost, insurance claims. Speaking in general terms, people with lower credit scores are perceived to value their possessions less, and are more likely to commit insurance fraud to meet mounting debt obligations.
It wasn’t long before financial institutions began looking at FICO Scores to determine if a job candidate was of “sound financial mind”. Banks, brokerage houses, and insurance companies, didn’t want a financially overburdened employee to have access to other peoples’ money fearing the credit burden might drive the employee to do something “unethical”.
The problem I have is that FICO Scores are not necessarily indicative of a person’s credit worthiness or financial savvy. In fact, there are two reasons why your FICO score may be low.
The first (and more common) reason is the person may actually have financial problems. Whether it be from medical bills, over spending, or an investment gone bad, this person may have defaulted on a his credit lines or even filed for bankruptcy due to poor money management skills.
The second reason for a low FICO Score is that the person doesn’t borrow money. Syndicated talk show host Dave Ramsey claims that the FICO Score is an “I love debt score”.
Ramsey claims that even though he is a multi-millionaire (having built a personal fortune without the use of credit), he couldn’t get a job at a local bank because he has a FICO Score of ZERO due to not borrowing money for the last 20 years . “We need to stop worshiping at the alter of the credit score” he says.
If employers feel the need to check a potential employee’s credit file they should look beyond FICO Scores and actually examine each individual trade line in a candidate’s credit report to get an accurate picture of where the candidate stands.
Blindly dismissing an individual for employment because his FICO Score dips below a certain “benchmark” is an injustice to the candidate, when the reality may be that he is far superior “financially” than the manager doing the hiring.
Until more companies get their act together in assessing credit reports, there are a few things that you can start doing now to improve your credit scores.
If you are prospering financially without the use of credit (and subsequently have low FICO Scores), you may want to talk about this in your cover letter or during your interview and turn it into a positive. Try spinning it like this: “I never saw the benefit in paying interest to other people, I have benefited greatly from paying as I go!”.
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