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Can your Employment get Affected by your CIBIL Credit Score?

Can your Employment get Affected by your CIBIL Credit Score?

finance
August 1, 2022
5 min read
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Can your Employment get Affected by your CIBIL Credit Score?
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Your ability to get employed may be hampered by a poor CIBIL credit score, which could get you into trouble. If you have a bankruptcy, things could get much more difficult. According to a recent research1, 60% of companies check the credit files of both current and prospective employees. This is done to assess your level of financial stability. Employers may consider your CIBIL credit score before hiring you and that makes it important for you to have a good score. 

A CIBIL credit score is a three-digit numerical number which is used in India to give an idea about a person's credit history. The credit history contains the person's credit payment history of various kinds of loans. Additionally, CIBIL records information about your payments, late payments, loan term, etc. 

Most of the employers that are hiring are more frequently using the services of credit screening companies before making employment decisions. These screening companies assess candidates' CIBIL credit scores in addition to verifying their educational, medical, and criminal histories. A candidate with a high CIBIL credit score is unlikely to engage in dishonest or fraudulent behaviour. 

3 Reasons your Employer may Check your CIBIL Credit Score

There are many reasons why an employer will check your CIBIL credit score. Listed below are top three (3) reasons why your potential employer may check your CIBIL credit score before deciding to hire you: 

  1. Gives an Insight to your Financial Background
    Before employing someone, many businesses conduct a background check that may include a financial background check as well. Checking your CIBIL credit score can be a component of the background investigation because a low CIBIL score may indicate a lack of financial discipline. The employer may not want to hire someone who doesn’t have a good CIBIL credit score as a messy financial background may land the potential employee in numerous troubles. 
  2. To Establish Trustworthiness
    A poor CIBIL credit score may be a sign that an employee is careless with their borrowing and repayments, even though its impact on a job may be little. Employers who collect employment data through CIBIL may view it as an extension of the applicant's personality and as a gauge of the level of responsibility a worker can accept. Typically, a candidate's CIBIL credit score is taken into account when determining their trustworthiness. A higher CIBIL credit score suggests dependability and integrity, two qualities that most of the employers look for in candidates. Integrity is valued in a worker, especially in banks and other financial institutions.
  3. Financial Issues may Impact Performance
    It has gotten a lot simpler recently to apply for credit of all kinds. Home loans, education loans, personal loans, credit cards have become popular due to their ease of borrowing. Many people, however, might not pay back these loans within the stipulated time and even fail occasionally, either purposefully or inadvertently. This frequently results in a debt trap, in which borrowers may become trapped for an extended length of time. This is a bad condition for the borrower and can lead to high levels of stress, which can impair work performance.

Do all the Employers in India Check CIBIL Credit Score before Hiring?

The answer is no. Not all the employers in India check CIBIL credit score before hiring an employee. However, there are companies that check CIBIL score before hiring, especially banks and financial institutions. This applies to both government jobs and jobs in private sector. Prior to employing a new candidate, every bank has a system in place to conduct a background check, but the analysis has undergone a recent alteration. They are currently requesting the employee's CIBIL credit score as part of the analysis. 

How to get a Job with a Bad CIBIL Credit Score?

As mentioned above, not all the companies conduct a background check on your CIBIL credit score. So, there are chances that you will get a job even with a bad CIBIL credit score. However, if you wish to get into a financial company or a company that has a financial background check in place, you may have to work to improve your CIBIL credit score for your dream company. 

Here are a few tips to improve your CIBIL credit score before applying for a job: 

  1. Repay your Debts Regularly
    It is important to make sure that loan and credit card payments are made on time and by the deadline and also in full. This has a significant impact on both your CIBIL credit report and score. Verify that your CIBIL credit report does not contain any non-payment penalties or payment delays. If you have trouble remembering your payment due date, set up automatic debits by contacting your bank. This way you will not fall behind the payment date and your CIBIL credit score will improve for making regular and timely repayments. 
  2. Maintain Decent Credit Utilisation
    It will look bad on your CIBIL credit report if you take out a lot of loans or use your credit card to the point that you virtually never have it close to its limit. Try to utilise the assigned credit as little as possible. The majority of people are unaware of the fact that excessive borrowing lowers the CIBIL credit score. Your credit score can be negatively impacted if, for example, you took out a sizable loan or overused your credit card to the point where your limit is practically at its max. Therefore, it's critical to utilise credit as little as possible.
  3. Refrain from Applying for Multiple Loans
    Do not make the mistake of applying for multiple loans and credit cards within a brief span of time. It will impact your CIBIL credit score and with a bad score you may not be hired by your employer you have applied to. Applying for multiple loans and credit cards in a short period of time shows that you are failing to manage your finances with your earning and you are in desperate need of financial help. 

Although your CIBIL credit score reflects your creditworthiness, it also aids in assessing your financial responsibility when you apply for a job. Employers used to only look at a candidate's CIBIL credit score when they were applying for certain positions or profiles, but today practically every significant private and public company looks at it for all positions. 

Therefore, it is a good idea to look out your current CIBIL credit score before applying for any job. Make sure to give your prospective employers with a true and factual CIBIL credit score by having any inaccuracies promptly fixed. The CIBIL credit score is undoubtedly one of the more significant requirements for employment, although not being the most crucial one. However, merely having a high CIBIL score does not ensure that you will get an offer letter for the finest job. To land the ideal job, having a strong CIBIL score is just as crucial as having strong management, organising, and communication abilities.

FAQs Related to Employment and CIBIL Credit Score

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What do employers look for in your CIBIL credit report?

Generally, a few factors are taken into consideration by employers while assessing a candidate’s job application. Employers may check the repayment history, any unsettled debt/loan, duration of the draft history, type of credit mix used by the applicant, and current borrowings. 

Is it legal in India for companies to check CIBIL credit score of a candidate before hiring?

It is not illegal for companies to check the CIBIL credit score of a potential employee to make their decision of hiring them. The companies should know what type of person they are about to hire so that there are no issues later on. 

What is a good CIBIL credit score for getting a job?

Each business will have its own standards for what constitutes a bad or poor CIBIL credit score. Here is a general rule of thumb: 700 to 850 is an excellent CIBIL credit score. 680–699 is a good CIBIL credit score.

Can a company not hire you because of bad CIBIL credit score?

Yes. It may be possible that a potential employee’s job application gets turned down by a company due to a bad CIBIL credit score. Some companies may not want to hire someone who is struggling with their personal finances as it may hamper their performance at work.