Maintain a good credit history will do more than offer you low interest rates when securing a loan or lease. It will also help you when you want to start a career in the financial industry.
Even if an aspirant broker has the drive, determination and ability to pass the exams administered by the Financial sector regulatory authority (FINRA), like the Series 6 or Series 7, this does not guarantee that they will become an authorized representative or even that they will be hired by a broker-dealer. In order to obtain and maintain a career in the financial industry, it is also important to have a credit report.
Note that the following states limit an employer’s right to check your credit report: California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington.seNo employer can check your credit score, which is different from your report, without your written consent, except in the trucking industry.seseseYour report does not include a score.
Key points to remember
- To maintain a career in the financial industry, it is important to have a clean credit history, as employers in some jurisdictions have the right to check your credit report.
- A bad credit history or bankruptcy can indicate fraudulent behavior, an inability to handle money properly, a reflection of bad character, and damage a company’s reputation.
- FINRA requires all registrants to disclose any bankruptcy filings made in the past 10 years.sese
- Employers typically review an individual’s credit card balance and legal judgments in their credit report.
- Individuals must constantly check their credit reports, fight against any errors and provide explanations for any unfavorable item.
Why is your personal credit history a factor?
There are four main reasons why a bad credit report or a bankruptcy are relevant in the hiring and registration process:
- There is a general feeling that a bankrupt person may be more likely to engage in fraudulent activity in order to make a living.
- There is a school of thought that suggests that if a person is struggling to manage their own money, that person may not be able to competently manage customer money.
- Many employers believe that a bad credit rating or the existence of bankruptcy proceedings is a reflection of bad morals or bad judgment.
- Since bankruptcy filings are publicly available through the FINRA BrokerCheck system, companies might want to avoid hiring someone whose credit history could damage the company’s reputation by giving existing or potential customers the impression that the company has lax employment standards.
FINRA Bankruptcy Requirements
Any natural person requesting (or transferring) registration with their State or self-regulatory body has the obligation to disclose a personal bankruptcy filing that has taken place within the last 10 years on the U4 form. This requirement also applies if you are currently registered or have filed for bankruptcy, as it is your responsibility to ensure that all information on the U4 form is up to date.sesesese
Although this is not an automatic disqualification, a person can be refused registration if they have filed for bankruptcy protection within the past 10 years. Additionally, if you fail to disclose details of a bankruptcy, FINRA may impose disciplinary action; including potentially excluding you from the securities industry. This includes cases where bankruptcy occurs after initial registration and a registrant’s U4 form is not updated.
What’s on a credit report?
There are a few things about an individual’s credit report that employers tend to take a long, hard look at, including credit card balances and legal judgments.
- Credit card balance: Employers not only look at the number of cards the potential employee has in circulation, but also the average length of time it takes the individual to settle their debts. In addition, the report will detail any other notes or debts that the potential employee has past due, including first mortgage, home equity loans, personal loans and Credit lines. The idea is whether a potential employee is someone who will ultimately represent the company in a professional manner.
- Legal judgments: In addition to credit cards and loans, the potential employer will closely review all (adverse) legal judgments that have been rendered against the potential employee in the past seven years (i.e. the period covered by most credit reports). Employers research all major debts in conjunction with these verdicts, as well as any indication of how and why the individual may have incurred these debts.
Why are judgments and court proceedings so important? Because the details of such procedures tend to reveal the essence of a person’s character. With that in mind, most employers will want to know if a specific judgment or debt arises from a minor misunderstanding or serious criminal activity, so be prepared to answer these questions. during the interview.
Combat credit history issues before the interview
In some cases, bad credit history can be changed before an interview where your history could be questioned. Here are some steps to follow:
- Individuals should review their credit reports at least once a year. (To get your credit report, just contact the three major credit bureaus: TransUnion, Experian and Equifax.) Also, specifically look for inaccuracies, such as debts that are listed as unpaid but are actually paid off. Also look for any judgments that may have been met or any misinformation about your ability to pay off your debts on a timely basis.
- If you find any errors, contact the credit Company immediately and request that the errors be corrected. Be sure to check your respective credit bureau’s website for instructions on submitting an error notice. In most cases, you will need to contact the creditor who made the mistake and submit that information to the credit bureau.sese
- Take advantage of the comments section at the bottom of your credit history. Use this area to explain the reasons why the debts were incurred in the first place and what you are doing to improve your financial situation.
These actions will go a long way in answering any questions that might otherwise arise during the actual interview process.
Explaining bad credit to a potential employer
If the details of your credit report are brought up during the interview process and you were unable to correct the issues before the interview, your next strategy is to explain in detail what you are doing to repay your loan. debts.
Specifically, you must be prepared to prove (in the form of receipts or acknowledgments of payment) that the debt is being paid off or that you have sufficient income or assets to ultimately settle the debt.
If an employer plans to deny you a job based on your credit report, they are required to provide you with a warning before doing so. They are required to send a “pre-unfavorable notice” and wait a certain amount of time for you to counter by explaining the issues or correcting them.
In other words, prove to the employer that you are financially solvent and are able to manage your affairs. This will go a long way in proving that you are a responsible and trustworthy person.
Additionally, potential employees should keep a hard copy of their credit reports handy to show the potential employer exactly what debts are past due and which have been settled. This will help to avoid any confusion or miscommunication.
Finally, tell the truth. If the employer thinks you are lying or is able to prove that you are lying, you will not be considered for the job.
The bottom line
A person’s credit history is relevant to both the registration and the interview process. To this end, potential employees should be aware of the aforementioned FINRA rule regarding bankruptcy as well as what employers look at in terms of credit history when deciding to extend a job offer.