Why Does a Company Do Credit Checks?

Getting a job has become increasingly challenging in recent times. Not only do you need a stellar resume and solid references, but you now need pristine credit. Credit checks have become commonplace in the screening process of applicants, even for jobs that don't involve dealing with money. Along with your resume and cover letter, your credit report is a document used by employers to make assumptions about your character and work ability.

Importance of Credit

Once upon a time, your credit score only measured what kind of interest rate you'd get on a loan or a credit card. However, those days are long gone. These days, your credit score determines if you can get an apartment or even how much you'll pay for your auto insurance. In short, credit is now seen as a reflection of your overall risk level, and a credit check as part of an employer's screening process is further evidence of credit's importance.

Risk Factor

Just as auto insurance companies believe someone who is reckless with credit will be a dangerous driver on the road, employers may believe that you can't be trusted on the job if you can't manage your own credit. Fair or not, employers can make assumptions about your level of responsibility by looking at your credit report. For example, if you've been late on bills in the past, it might indicate that you're forgetful or are unable to plan ahead.

Theft

Another reason why employers run credit checks is so they can identify people who might potentially steal from the company. According to MSN Money, some employers believe that people who have a high amount of debt may be more inclined to steal in order to pay off their debts. In addition, if an employee steals a customer's money or property, that customer may end up suing the company, exposing the company to huge losses.

Financial Matters

If you're applying for a job that requires you to manage money, a credit check is a critical source of information for your potential employer. A good credit rating shows you're capable of managing your resources and, by extension, those of the company. On the other hand, if your credit history is spotty, it might convince the company that you'd hurt their financial strength. No matter how strong your resume might be, being in this situation will put you at a serious disadvantage if you're competing with other candidates who have good credit.