Archive for the ‘Unemployment’ Category

It should be well known to you by now that credit reports aren’t just used by lenders looking to approve you for a new loan or credit card.  A few late payments and collection accounts can prevent you from opening a bank account or renting an apartment. Now with so many applicants for every vacant position, employers are increasingly using credit scores to judge applicants during the hiring process.

According to a survey by the Society for Human Resource Management of more than 430 organizations in late 2009, 47% of employers say they check the credit history of applicants for certain positions, up from 42% of employers in 2006.

This means that managing your credit and getting out of debt isn’t only important for your personal balance sheet, but your income statement as well. Having bad credit can leave you shut out of the very employment opportunities you need to keep your head above the debt waters.

This also means a catch-22 for many people whose careers went sideways as a result of the global economic malaise.  They lost their job, fell behind in their bills, and no have blemishes on their credit reports that prevent them from securing the same high-paying jobs that they once took for granted.

Employers are required to get your written permission to conduct a background check that includes your credit file, but don’t think that opting out can save you. Most employers won’t even consider applicants who decline consent.

So what should you do? If you are actively in the job market it pays to get your recent credit report (check out Quizzle.com for a free report and score) and be able to speak to any negative notes in your file. Unfortunately, it’s unlikely that a prospective employer nowadays will even give you the opportunity to explain dings on your credit file, but you should be prepared to if it will help tip the scales in your favor.

Most employers aren’t overly concerned with things like high credit card balances and such that lenders would be concerned with, but late payments, collections and bankruptcies are seen as huge red flags on your character, whether that’s fair or not.

This is just another reason why you need to build up an emergency fund, even while you’re working to pay down your debt.  If you’re living paycheck to paycheck, just one or two months out of work can do irreparable harm to not only your credit history, but your job prospects as well. Work to have at least six months of income set aside in a 100% FDIC-insured account that will allow you to draw down on your savings to get over a short spell of unemployment.

Know that unemployment benefits won’t equal your on-the-job earnings, and credit cards aren’t ideal as a safety net (although they can  do in a pinch.) As a result, having cash in the stash is vital in these days of uncertainty and poor prospects.

With nationwide unemployment reaching close to 10%, there are few parts of the country that haven’t been seriously affected by job losses.  But booms and busts in the job market don’t hit everywhere at one.  To see how and where job losses have mushroomed in the past few years, check out The Geography of Jobs.

Using data for net change in jobs from the U.S. Bureau of Labor Statistics, the map shows localized employment trends on a rolling 12-month basis, starting in 2004. Back then, job gains were popping up all over. In more recent months, you can see job losses grow. And grow. And grow.

It’s easy to see the rapid rise and fall of areas where new real estate construction blossomed, and then imploded with the collapse of home values and mortgage lending.  Areas like New York and Washington, DC were able to buck the trend until the bottom fell out of the financial markets.

To see the map in action, visit the website of the consulting firm Tip Strategies, Inc. which put it all together.

A good friend of mine just sent me an e-mail letting me know that he was recently laid off.  This just a few months after the birth of his second child.  

With job losses mounting and unemployment approaching a whopping ten percent nationwide, this is a very scary scenario for most middle-class workers.  Even traditionally safe jobs like teaching in a public school system is no longer as secure as we thought.

If you are one of the unlucky souls hit by an unexpected bout of unemployment, financial website Bankrate.com has a seven step plan for the newly unemployed that you need to see right away.  You’ll want to read this article in full, but here’s a quick summary of the steps:

Get to the unemployment office fast

Bring your family in on the plan

Manage your mortgage payments

Put the credit cards away

Know your health insurance options

Don’t touch your retirement fund

Commit to saving money

With so much uncertainty in the job market I would recommend that everyone have a pre-layoff action plan as well.  Knowing that your ship isn’t coming in (an very well might sink) is good incentive to make sure your life preserver is plump and your lifeboat is seaworthy.  Here are a few things to consider doing right now, and at all times:

1. Always have an updated copy of your resume in Microsoft Word format
2. Make sure your social network accounts reflect you in a positive light, e.g. no heavy drinking/drug references, sexist or racist humor, questionable photos, etc.  If your friends have posted such, ask them to take the items down and tell them why it’s important.
3. If you haven’t already, join LinkedIn.  Amass a good collection of personal and professional contacts and have positive references in abundance.  This is one of the top sites that prospective employers troll to learn about your work history and relationships.
4. Maintain connections with past employers.  You’ll need them for references, and they may be interested in hiring you back.  Even if you didn’t leave on great terms, you may be able to rebuild some goodwill with them as time goes on.
5. Keep up your side projects.  Debtbeat rule #1 is to make more money than you did when your debt got out of hand and this site has a host of ways to earn extra cash outside of your main job.

Working hard and making yourself indispensable on the job is a good strategy and only fair to your employer if you make an honest wage.  But if you’re cast overboard, it’s better to know you have a life preserver and a general idea where the next closest ship is.