Score & Soar: Here’s how your credit score can help land that dream job

In June 2022, Jugal Dalal (name changed), 26, a Vadodara-based commerce graduate, applied for a probationary officer’s job with a leading public sector bank. But his application was rejected due to his poor credit score. Dalal had defaulted on some credit card repayments, and his credit history was affected because of this. He was one of many rejected for this reason.

“The Institute of Banking Personnel Selection (IBPS), an organisation that aids banks in their recruitment processes, has established a minimum credit score requirement of 650 for candidates applying for clerical and probationary officer positions in banks,” says Dhriti Prasanna Mahanta, Vice President, TeamLease Degree Apprenticeship. He added that banks handle sensitive financial information and require employees with a track record of responsible financial conduct.

“Besides local banks, there are a few multinational companies (such as Citibank, Deutsche Bank, T-Systems) who check the applicant’s credit history during background verification,” says Parijat Garg, a digital lending consultant.

A good credit score is seen as a sign of trustworthiness and reliability.

Of job ads and credit scores

Nowadays, banks are highlighting the importance of a good credit score in their recruitment advertisements. For instance, in March 2022, the State Bank of India (SBI) had put out an ad for probationary officers. According to the ad, candidates who have defaulted in the repayment of any loan taken from banks / NBFCs, including credit card dues, and have not repaid their outstanding till the date of issuance of the appointment letter, shall not be eligible for appointment to the post.

It further stated that candidates who have repaid their outstanding on or before the date of issuance of the appointment letter, but whose credit report has not been updated till then, need to ensure that they either get the report updated, or produce a no objection certificate (NOC) from the lender stating that there is no outstanding, failing which the offer letter shall be withdrawn.

“The review of credit reports is common for employment in the banking, financial services, and insurance (BFSI) sector. In fact, this is expected to become common across other sectors,” said Nikhil Anand, Senior Vice President, Operations, NLB Services, a talent solutions company that provides workforce solutions globally.

Also read | Want low home loan interest rates? A good credit score helps

Why does the employer check the applicant’s credit profile?

Employers are more interested in a potential candidate’s credit history than their credit score for multiple reasons. “Firstly, a view into an individual’s credit history speaks volumes about the person, especially about how financially responsible the individual is,” says Monica Mishra, Head of Human Resources at Fibe, a digital lending platform. She adds that it is also an important tool to check how financially distressed an individual is, as this will determine the likelihood of theft or fraud at the organisation.

Employers in financial services or organizations where financial responsibility is considered crucial might use the services of credit bureaus to screen the applicant’s credit profile and get a bird’s eye view into the hire’s finances. “For instance, an individual who is irresponsible in managing his finances cannot be a good fit in a role that involves handling the company’s finances, or customers’ monies,” Mishra adds.

“Now employers also look at credit scores to see how a candidate is, beyond tests and interviews. They also check for frequent payment defaults, and whether one has taken excessive debt,” says Anand.

A good credit score of 650 and above can enhance the prospect of getting hired smoothly. “A low credit score may result in a candidate getting disqualified,” Anand adds.

Also read | Credit Scores: A beginner’s guide to good financial health

Is it legal to check the credit score of applicants?

It is not illegal for employers to pull out a candidate’s credit score before hiring. “In the banking sector, the Reserve Bank of India (RBI) has set guidelines for employee credit checks,” says Mahanta.

However, an employer cannot directly check the credit score or history of an applicant. “The employer fetches the credit profile with the consent of the applicant only for the purpose of background verification,” says Garg.

Also read | 800: The magic credit score and how to get it

What should job applicants do?

Applicants for banking or finance jobs should certainly check their credit scores and reports a few months in advance. “If there are any issues with the credit report, the applicant should follow it up with the bank and credit bureau to get it rectified in time,” Garg warns. He suggests keeping the updated loan statement of accounts (SOA) or no-dues certificate (NDC) handy to provide to the employer, if the report does not reflect the true situation.

Individuals need to understand that improving their credit score is a gradual process and cannot be done overnight. “It usually takes at least six months to increase your credit score,” says Mishra.

Also explore: Free credit report and regular credit score updates on the Moneycontrol app and website. 

He says that in order to improve your credit score, pay your bills (including but not limited to, credit card payments, rent, utilities, and other bills) on time. “Another way of improving your credit score is by limiting your card spends to 50 percent of the limit, or conversely, by increasing your card spending limit,” Mishra adds. She suggests keeping the overall credit utilisation ratio (CUR) up to 30 percent or less.  CUR is the percentage of a borrower’s total available credit that is currently being used.