Despite a slowly strengthening economy, job seekers have plenty to worry about these days. Stiff competition and fewer available jobs are holding many Americans back from joining the labor force. Unfortunately, job seekers with poor credit have yet another thing working against them.
An estimated 47 percent of U.S. employers conduct credit background checks on job candidates, according to a 2012 survey by the Society for Human Resource Management (SHRM). That's down from the 60 percent who conducted credit checks in 2010. Red flags differ among employers but could include late payments, maxed credit cards, or other financial black marks that indicate a lack of responsibility in a hiring manager's eyes.
The good news: Even if you have a lousy credit history, you can still make a strong case for why an employer should hire you. In fact, among organizations that perform credit history checks, 80 percent say they have hired someone despite a poor credit report, according the SHRM survey.
A key factor is how well you present yourself. Consider these tips from a credit expert and career coaches on how to play up your strengths and use your poor track record with credit to your advantage:
Check your credit report. It's important to make sure your credit report is error-free before walking into a job interview. You'll also want to know what the employer will see if they pull your report, which does not contain your credit score. (Although keep in mind that reports can vary among credit bureaus.) "You never want the guy across the desk from you to know more about your financial past than you do," says Gail Cunningham, vice president of membership and public relations for the National Foundation for Credit Counseling.
If you want to clarify why a financial hiccup took place, you're allowed to attach a 100-word explanation to your credit report. The three major credit bureaus—Experian, Equifax, TransUnion—differ in how many explanations you can include. However, Cunningham advises against adding too many explanations, since most people can't chalk up every mistake to an element outside their control.
Grant them permission to check your credit. Employers are legally required to get your permission (orally or in writing) before they can pull your credit report, as mandated by the Fair Credit Reporting Act. Andrea Kay, a career consultant in Cincinnati, says not giving consent will probably knock you off the list. "You'll put doubt in the employer's mind of what type of person you are if you say no," Kay says. "You don't want to appear to be hiding something."
Proceed with caution. Before delving into an explanation for your credit woes, acknowledge the employer's concern. By conveying that you can see why poor credit raises a red flag, you show you're not trying to downplay the issue. Kate Wendleton, president of the career coaching firm The Five O'Clock Club in New York City, says people would be surprised by the number of recent college graduates who, when confronted about bad credit, say, "Oh, big deal. Everybody in my generation has a lot of credit card debt." Even though that response holds true for some college grads, Wendleton says an applicant's candidacy hinges on attitude. "If you take [credit problems] seriously and have a good explanation and tell them the progress you're making and how you're fixing it," employers are likely to be understanding, she says.
Be honest and succinct. Briefly explain how you got into the situation. (Going into too much detail may make the problem seem like a bigger issue, says Cunningham.) Then, show the employer evidence that you're working to clean up your credit. For example, you might supply them with recent statements showing credit card payments you've made to repay the debt.
These days, it's likely that employers will be more forgiving to applicants who've recently experienced credit trouble as a result of the poor economy, according to Cunningham. If it's obvious that you have a long-term problem with credit, she says it's best to be honest: "Tell them that you've learned your lesson through the school of hard knocks and that you're a different person now."
Practice makes perfect. Just as you would normally prepare for a job interview by rehearsing answers to specific questions, think about what you'll say if the subject of credit comes up. "You need to come across as confident about this, because if you seem freaked out, they're going to freak out," says Hallie Crawford, a career coach and founder of the Atlanta-based company Create Your Career Path.
If you're having trouble calming your nerves, take comfort in the strong likelihood that the employer will be understanding. "Employers realize that tough things have happened to good people in the last few years," says Crawford. She believes most hiring managers are reasonable people who may have also had financial trouble at some point in their lives, and are willing to overlook a problem with credit—as long as you show it's in the past.
The bottom line: Always steer the conversation back to evidence that shows you're the best candidate for the job. Sharing stories of your accomplishments or how you've exceeded expectations at previous jobs (e.g., "I surpassed my sales targets every year") should convince an employer that you're responsible and may help them overlook your poor credit history.