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Can Your CIBIL Score Affect Your Employment Prospects?

Yes, with the recent tie-up between TransUnion, the global credit bureau, and firms that are responsible for screening potential employees, your CIBIL score will definitely matter at the time of applying for a new job. Currently, major multinational corporations are increasingly requesting screening firms to not only investigate an applicant’s medical, educational and criminal statuses but also check their credit history as well. The logic given for this is that an employee with a good credit history and financial performance is highly unlikely to indulge in any form of illegal corporate activities. This step is also being seen as a positive act to strengthen internal corporate ethics and comply with international standards at the same time.

Recently, this move was even said to be added in the criterion for government jobs, apart from private corporate employments, as seen earlier. This was first confirmed in a job notice for the State Bank of India (SBI) (Ad. No. CRPD/CR/2016-17/01), dated April of 2016. In this notice, it was clearly mentioned that the candidate’s CIBIL score would be a criterion for selection and any default in repaying of loans or credit card bills, as well as an unsatisfactory CIBIL score, would result in the job application being rejected. Earlier, this was a practice mostly seen in the U.S. and other European countries, however today this practice has become part of the Indian corporate and government sector as well.

What Is CIBIL Score And Why Is It Important For Job Applicants?

The CIBIL score is 3-digit number, anywhere between 300 and 900, and is meant to provide a brief report of your past performance in payment of loans and credit card bills. This report summarizes your loan and credit transactions with each and every bank and financial company, and focuses on a certain period of time. Simply put, the CIR is your credit report whereas your CIBIL score is the credit ranking you get, based on the performance as shown in your CIR. Your CIBIL score is an excellent way to determine your financial condition.

Although the main purpose of CIBIL score is to reflect your credit worthiness, the CIBIL score also helps to determine how responsible a job applicant is with managing their finances. In the beginning, employers would check a candidate’s CIBIL score only when he or she applies for certain posts or profiles but today almost every major private and public employer is looking at a candidate’s CIBIL Score for all kinds of employment posits.

Now, certain instances may lower your CIBIL score, like being a co-borrower in a loan which has not been repaid, although it is every person’s responsibility to keep a regular check on their CIBIL score. Any errors that you notice must immediately be brought to notice and rectified. Even a wrong entry in your CIR which lowers your CIBIL score can mean loss of employment opportunity for you. To an employer, a low CIBIL score does not just indicate that maybe the applicant is unlikely to repay their dues or credit, but also that he or she might indulge in unlawful corporate activities due to financial pressure and problems.

It is therefore advisable to check your current CIBIL score before applying for a new job anywhere. If any discrepancies are noticed, have them corrected swiftly and ensure that you present a true and factual CIBIL score to your prospective employers. Although the CIBIL score is in no way the biggest criterion for employment, it is certainly one of the more important ones. However, simply having a good CIBIL score does not guarantee that you would definitely get the best job too. A healthy CIBIL score is as important to have as communications skills, management and organizing skills and your professional talent to get the best job.

Relationship between Credit Report and Employability

Credit or CIBIL report is the financial report in which a person’s borrowings from different financial institutions and banks are reflected. The report is a way of tracking credit card and loan payment history along with dues, the tenure of loan and late payments. Why the CIBIL score report can affect your employment prospect seems unlikely, but the companies take a quick look at the candidate’s report before conducting the interview. Moreover, the number seems to be alarming because 60% of Indian companies do not consider hiring potential candidates with bad CIBIL score. The basic thing about the relationship lies in the fact - if you fail to manage your own finances, how can a company expect you to manage or deal with multi-million funds and budget? The human resource department does not neglect the simple correlation between job performance and credit score. As you forget to pay utility bills, you may also forget about the game-changing business meeting. The personal issues may jeopardise the work performance and a person with the good CIBIL score is potential to handle the organisational services. After having a look at the repayment history, the employer can be assured of hiring a responsible person who will possess the attributes of reliability, honesty, carrying out responsibilities and skilfully showing organisational skill.

Keeping an Eye on Reckless Nature

When an employee is in deep financial trouble and unable to repay the credit card or loan amount, this nature directly affects CIBIL score in a negative context. This is perhaps not the only reason because there are other contributing factors such as too many loan enquiries, huge expenditure, etc. The poor score is an indicator of an employee’s reckless nature for not paying credit dues at a time. That’s why the employer may sense that the employee is unable to provide an optimal level of job performance and execute assigned tasks with efficiency.

Evaluating Trustworthiness

The employer asks for the CIBIL score to find out whether you are trustworthy. CIBIL score for employment shows integrity. In this way, the employer understands that you maintain a good relationship with the financial institutions and organisations always require employees with an honest characteristic. Especially, if you have to handle financial services or clients, the companies always choose a trustworthy person with a high level of integrity and honest work ethics. The western countries highly recommend checking the credit score for employment to find out the criminal background of the individuals. Bad credit always carries the blemish of a criminal background. In general, it primarily refers to the irresponsible behaviour of an individual who is unable to take care of important things in personal (and professional) life.

Credit Issues Seizing Employment Prospect

Outstanding credit balance and missed payments are not as serious as being turned down for employment due to lawsuits. The majority of human resource professionals have conjectured that outstanding judgement impacts on the employee’s job prospect. If you are not up for any twisted surprise in the interview room, check your CIBIL score report by paying a certain amount of fees.

Finding out Risky Financial Condition

Good CIBIL score always accelerates your job search; however, the poor score does the very opposite of it. When there is an inconsistent repayment history, a huge number of delinquent accounts and open accounts along with high monthly payments, the HR personnel may take two steps back. If you are applying for the position where you may be in-charge of company funds like accounting tasks and company funds, the risk of money laundering cannot be completely eradicated.

Other Side of the Story

Now employment background check about credit score has become an integral part in the interview phase carried out by the human resource team. As bad credit implies bad intention, you may leave a negative impression for having specified settled dues for several credit accounts. The credit report also highlights the pile of debts, if any and it will leave a dent on the applicant’s work profile. Now, the person with debt trap is not likely to be eligible for an efficient employment. However, this logic goes against the people who suffer from a wrong entry in a credit report or identity theft. The practice of checking CIBIL score is now finding establishing marks, but Information Technology sector opts for CIBIL score report check more often. Therefore, you should prepare yourself to keep up score level. The new employees generally have the tendency to spend the entire month’s salary within a short period. They mainly struggle to get their finances on the track after starting to earn on a regular basis. In a few days, they are in huge credit card debts resulting in negative impact on CIBIL score. Thus begins the journey of new employees to seek jobs with a high payroll and keep their heads above the sea of debts. However, the cumulative figure of continual rejection gets bigger and the burden of poor CIBIL score decreases job prospect. In this way, they come back to square one.

What Employers Look For In A CIBIL Report?

There are certain aspects in your CIR (which includes your CIBIL score) that are important to check according to potential employers. The CIR and CIBIL score are indicators of your ability to repay credit and loans.

These are the major factors in a CIBIL report which employers are more focused on:

  • Repayment history – The repayment history consists of 35% of your complete CIR. Even a single delay to make the payment or miss it entirely, can result in a drastic loss of CIBIL score and lowers your credit ranking. Hence, it is most important to repay your credit card bills and loan payments on time.
  • Unsettled cash – Unsettled cash consists of around 30% of your entire CIR. Naturally, the financial condition is dynamic and you may not be able to make the complete repayment, however it is highly advised not to pay less than 40% of the entire amount, as this can affect your CIBIL score. Maintaining a steady cash-flow for repayment of loans or credit is an excellent way to avoid this situation.
  • Duration of Draft History – Your draft history makes for around 10% of your CIR. A borrower with a longer use of credit cards, along with timely repayments on it, has a higher CIBIL score.
  • Borrowings – This section also makes for around 10% of your CIR. Borrowing too much and too frequently, along with unsettled debt, adversely affects your CIBIL score. It is most important to inculcate a disciplined approach when it comes to using credit cards and making repayments.
  • Credit Mix – This is the collection of loans that you have borrowed till date, including secured and unsecured loans, and consists of 10% of your entire CIR. Candidates with both types of loans need not worry (provided repayments are made on time), however candidates having only unsecured loans are more likely to have a lower CIBIL score.

How to Ensure A Good CIBIL Score Before Seeking Employment?

There are times when uncontrollable factors, such as emergencies and tragedies, may result in non-repayment or delay in repayment of loans and credit card bills. This can result in lowering your CIBIL score, with no direct fault of yours. Hence, in case you notice that your CIBIL Score is abnormally low, there are certain steps you can take to help increase it. Check out the top solutions to improve your CIBIL score and ensure better chances at employment when applying for a dream job:

  • Regularly check your CIBIL score – Similar to checking your social medial profile frequently, you can also get in the habit of keeping a regular check on your CIBIL score online as well. So, if you notice an irregularity in your CIBIL score, you can immediately report it to CIBIL and get it rectified before any damage is done.If your CIBIL score indicates 700-900, you are out of troubles. If the score is below 350, you should take immediate steps to improve them. There are ways to rectify the score free of cost, but if you do not have patience, professional help is useful. Steer clear of the fraudulent service providers claiming to improve your score within 24 hours because it is a time-consuming process. Once you take control over your own credit report, you can prevent all the possibilities of letting it control your own future. Therefore, develop the habit of checking CIBIL score report once or twice in a month.

  • Regulate borrowing – In general, you are eligible to apply for multiple loans, only if you successfully make repayments on your first loan for the first 3 months. This is for your convenience but should be opted for with extreme care. Ensure that your borrowings do not exceed your income and ability to repay the amount on time and maintain a better CIBIL score.

  • Start Repaying on Time – The timely repayment history appeals to the hiring officer and the person is always keen to hire an organised employee. If you have already budgeted and planned repayments ahead of time, the employer will perceive that you have the capability to meet deadlines. When your records are clean without any trace of no- or late-payments, you can heave a sigh of relief.
    Also, too many loans are detrimental to the CIBIL score for employment. Try not to have more than 3 loans at a time and balance the ratio of secured and unsecured loans. The range of trouble goes up if you have way too many unsecured loans. When you keep the credit usage within 30%, it will improve the credit score. Credit utilisation ratio implies the proportion of the credit limit used by the user. If the credit utilisation ratio exceeds the limit of 30%, the user will be entitled as credit hungry. Always keep in mind that CIBIL reduces the credit score for employment when the limit is exceeded. Candidates should stay away from too many credit card or direct loan enquiries in a short time frame. The hard enquiries by CIBIL are susceptible to decrease the CIBIL score further by a few points. CIBIL score must not be a deterrent for not securing job position, but a good score always enhances the prospect of getting hired smoothly. At present, there is a chance that the CIBIL score for employment may stand between the pool of competition and dream job. Henceforth, start paying off debts or dues and pay loans on time for increasing credit-worthiness.