Home / Money / Personal-finance /  Credit score could impact employment prospects

If you’re planning to change jobs or are about to enter the workforce, your potential employer may not just examine your resume but your credit score too. The three-digit number is used to analyse a person’s credit history and is typically used by lenders to understand the credit-worthiness of a person applying for a loan or credit.

Increasingly, employers in India have started considering credit score as one of the criteria while evaluating job applicants. This means, other than making sure you give your best in the interviews and stay on top of your game, you also have to make sure you maintain a good credit score. Experts said, in a range of 300-850, a score above 700 makes you highly eligible for easy loan or credit.

“Since poor credit score may be a reflection of irresponsible behaviour while repaying loans, those with a low score can have their chances of securing a job in such organisations hampered," said Radhika Binani, chief products officer, Paisabazaar.com. Presently, credit screening during recruitment process is limited to a few sectors such as telecom, banking and insurance, credit rating agencies and for jobs with regulators such as Sebi and Irdai.

However, more organisations are likely to adopt it as it is an effective way to flag potential financial problems faced by an applicant. “Frequent delay in repayments may indicate the applicant is financially indisciplined or does not live up to the terms of agreement. Similarly, having excessive debt might increase the probability of committing fraud or unethical acts," added Binani.

Credit scores are also examined by employers to understand the financial health of potential employees. Someone who bears the burden of a really huge debt may remain disturbed, which could impact his performance.

What you can do

Though more and more organisations are seeking credit reports from job applicants, here are some tips to help you maintain a good credit score.

If you have already availed a loan or have unpaid credit card bills, it is a good idea to obtain your credit report at regular intervals. By doing so, you will know your credit score beforehand which can help you take necessary steps to improve or maintain the score. This will also help you track clerical errors, if any, or fraudulent transactions that could lower your credit score.

Pay all your EMIs and credit card dues on time because lenders and credit card issuers report defaults to credit bureaus such as Cibil and Equifax which could further impact your credit score. Binani said job applicants should avoid too many direct loans or credit card enquiries with lenders within a short span of time. These are considered as hard enquiries by the credit bureaus and each hard enquiry will pull down your credit score by a few points.

It is also important to maintain a healthy mix of secured (home loans) and unsecured credit (credit cards)—which is not linked to any collateral—and keep your credit utilisation ratio within 30% which will boost your credit score. Credit utilisation ratio is the proportion of the credit card limit utilised by a person and a ratio of over 30–40% is considered as a sign of credit hungriness. Hence, credit bureaus reduce the credit score when this level is exceeded.

Keep track of your credit score to avoid losing that job opportunity.

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