In the 1980s, companies began using credit checks as part of the hiring process. Most companies now run credit checks when hiring. Unfortunately, bad credit affects job eligibility and may result in termination at a current employer. Companies may disregard a job seeker’s work experience, character, and interview skills because of bad credit. In addition, employers believe that a job seeker with bad credit is more likely to commit fraud or perform in an unethical manner.
Employers view credit reports to detect risky job seeker habits that they believe may affect work performance. Barry Maher, author of Filling the Glass, states, “A credit report can provide a snapshot of a person’s economic life that may confirm or contradict the resume.” Seventy-nine percent of all credit reports contain at least one error, and 75% of all credit reports contain one major error, which can lower a credit score. This emphasizes the point that bad credit is not a result of bad character.
If you have a direct contact within a company, obtain details about the hiring process. Ask if a credit check is part of the hiring process and find out if an exception can be made for obtaining a credit check. Limit job searches to people who know you. If you already have a relationship with a potential employer, the employer may be less likely to consider credit history. Obtain a recommendation from a friend or colleague of the employer, which helps create a positive image.
Target Smaller Companies
Small businesses are less likely to run credit checks because small businesses do not have the time, money, or the resources. Job seekers may have a better chance of being hired by a smaller company.
Know Your Rights
The U.S. Bankruptcy Code prohibits employers from refusing to hire a job seeker or fire a current employee for filing for bankruptcy. However, federal law does not protect applicants from discrimination due to filing for bankruptcy during the hiring process.
Based on the Fair Credit Reporting Act (FCRA), employers must gain permission to perform a credit check. However, the FCRA does not apply when employers conduct their own in-house credit checks. In addition, based on the FCRA, employers must notify prospective employees if credit was the reason for not being hired. The employer must also report which credit reporting agency supplied the information and provide a copy of the credit report. However, employers are not allowed to view credit scores.
Some states such as Washington, California, Colorado, Vermont, Delaware, Hawaii, Connecticut, Illinois, Maryland, Oregon, Nevada, and District of Columbia have state laws that limit the use of credit reports in job screenings. Most local, state, and federal government agencies, banks and financial institutions, law enforcement agencies, executive positions, and jobs that require a top-secret clearance request credit checks. Job seekers have to sign a release that allows an employer to gain access to their credit report. Job seekers can refuse the request. However, by federal law, the company can reject a job seeker’s application based on information in their credit reports and can reject an applicant who refuses to submit to a credit check. Deciding which law to follow is solely up to the employer.
Prior to or during a job search, you can dispute errors on your credit reports online at the credit reporting agency’s website or via postal mail. Order a free copy of your Equifax, Experian, and TransUnion credit reports at AnnualCreditReport.com or call 877-322-8228. Online disputes take up to 30 days to investigate, and postal mail disputes can take up to 45 days. In addition, you can contact the original creditor to dispute the error. If the creditor does not respond within 30 days, the item has to be removed. Ask the credit reporting agency to remove the item from your credit report. Get current on late payments or setup payment plans. Making at least two payments on an account can increase your credit score within a few months.
Do not disclose that you have bad credit in a cover letter, email, phone screenings, or interviews. By law, employees cannot pull a credit report until an offer is made. If a job offer is made, calmly and briefly explain what happened, how you are working to fix it, and why it will not affect your job performance. Remind the company that you are the best candidate for the job. Provide stories of your accomplishments or how you exceeded expectations at previous jobs. Provide letters of reference to demonstrate your character. If you are hired, you may have to provide evidence that you have paid off some debt or setup payment plans with creditors.