Looking for a Job? How Your Credit History Makes an Impact

/ BY / Credit Score

When you apply for a job with a new employer or put in for a promotion within your own company you expect that the employer will take a close look at your skills, your past work history and the way that you present yourself during an interview. But did you know that the company may be examining your personal finances as well? Employers and potential employers can check your credit record to determine whether you regularly make the payments that you’re supposed to and to see how deeply in debt you are. So maintaining a good credit record impacts more than your credit cards and credit score—your future earning power is at stake.

Why do employers want to look at your credit history? Many employers believe it will give them an indication of how well you are likely to perform on a job. If you can’t be counted on to pay your bills on time, will you be conscientious about showing up for work when you’re supposed to or completing the tasks that you’re assigned?  If your credit record shows your are far behind in several bills, prospective employers may worry that their workplace will be disrupted by creditors calling to demand payment, or that you will be too worried about your finances to really concentrate on your job performance.

Is this really legal?

Forty states permit employers to use credit records as one means of evaluating job candidates, but those companies are not given access to your credit score.  The 11 jurisdictions that currently prohibit or limit the practice of employers looking at credit histories include California, Colorado, Connecticut, the District of Columbia, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington.  Many other states have pending legislation that would restrict employers’ use of this data.

The federal Fair Credit Reporting Act (FCRA) does provide you with some rights concerning the use of your credit record for employment screening.  When you’re applying for a job or looking for a promotion, the employer has to give you a separate piece of paper that tells you that it might use the information in the report to make its decision. You have to give your permission before an employer can access your credit history. (Of course, if you refuse permission, the employer probably won’t go any further with your employment application and you are unlikely to get the job.)

If a company decides not to hire you, promote you or transfer you based on the information in your credit report, it must give you a copy of the report and a separate document that summarizes your rights under the FCRA.

What you should do before you apply

If you know you’ll soon be in the market for a job, be proactive and get a copy of your credit report to check that the information is correct. If something isn’t right, notify the credit reporting agency that you are disputing the information. If it turns out that incorrect information was sent to the employer, you can ask the credit bureau (or whoever is providing that information) to send a corrected copy to the company.

It’s an even better idea to monitor your credit reports on a regular basis to make sure that all the information is accurate. Correcting errors can take time, and you never know when that perfect job opening may pop up. 

If the employer asks to look at your credit record and you have had problems in the past, be honest about the circumstances. Explain why the problems occurred (an illness or a job loss for example), outline the steps that you’ve taken to fix the problem and assure the employer that you’re committed to being an outstanding employee—no matter what your credit record shows.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.