When Employers Look into Your Credit History

Heather R. Huhman

As if you don’t have enough to worry about in your job search, some employers now run credit checks on potential employees. It used to be that they only worried about an employee’s credit when the position involved handling money or overseeing financials for the organization. But today, it’s becoming a normal part of the screening process for some employers.

What red flags do employers look for in your credit report?

1. For positions handling money, credit checks show whether you have a pattern of handling money responsibly. If an employer sees a pattern of late payments, large debts, or other financial issues, they may see it as an issue for specific types of positions.

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2. Looking at your credit report can show employers whether you have a pattern of poor decision-making in your personal life that might affect your position at their organization.

3. Your credit report gives employers a sense of your responsibility level in your personal life. If you haven’t done anything to improve your credit or continue to be irresponsible with money, it’s a bad sign for employers looking to hire you.

4. Some employers believe people with large debts or credit problems could be more likely to steal or commit fraud, which organizations can’t afford, especially in today’s down economy.

5. Employers may fear lawsuits if an employee has access to customers’ money or possessions, since the lawsuit will usually fall on the company and not the individual.

However, it’s important to realize that employers can’t just arbitrarily pull your credit report and use this information as a reason for rejecting you.

[See The Importance of a Confident Follow Up.]

Here are a few things you need to know about employers looking into your credit history:

Employers need your permission. The Fair Credit Reporting Act requires your written permission for running a background or credit check through a third party. Obviously, it’s likely you won’t get the job if you refuse to grant permission for a credit check during the hiring process—so it’s mostly in your interest to comply.

Bankruptcy can’t be used against you. While other black marks can be used against you, filing for bankruptcy cannot. Employers are prohibited from discriminating against individuals who have filed for bankruptcy under Title 11 of the U.S. Code. Unfortunately, most folks who declare bankruptcy have other black marks on their credit report from before filing.

Employers are supposed to tell you if your credit information is used against you. Federal law requires the employer to provide the individual with a copy of the report and an explanation of their rights under the law, along with contact information on the company used to pull the report in case the person has any disputes to resolve on their report.

If you’ve been out of work for a while, this is a Catch-22. How can you keep a pristine credit report when you have no money coming in to pay your bills?

[See What You Should Never Say in a Job Interview.]

Here are several tips to improve your situation and improve your credit report:

• Pay your bills on time. Consistency is key with your credit report. It shows you’re financially responsible and improves your overall credit score.

• Apply for a credit card or small loan. If you don’t qualify, do this with a co-signer. Then, work towards showing responsibility, for example, by paying your bill on time each month.

• Decrease your debt. Your debt-to-income ratio is a big factor in your credit score. If you can’t easily increase your income, decrease your debt by paying down loans and paying more on credit cards.

• Sign up for an account on Quizzle.com to monitor your credit score and report. Quizzle is a website that provides you with your free credit report and score. It also gives you tools to improve and monitor your score.

Has poor credit ever affected your chances at landing a job or promotion? How did you improve your credit report and score?

Heather R. Huhman is a career expert, experienced hiring manager, and founder & president of Come Recommended, a content marketing consultancy for organizations with products that target job seekers and employers. She is also the author of Lies, Damned Lies & Internships (2011) and #ENTRYLEVELtweet: Taking Your Career from Classroom to Cubicle (2010) and writes career and recruiting advice for numerous outlets.