Can My Credit Report Affect Me Getting A Job?

by | Jan 15, 2023 | Billsaver, Building Credit

Most people know that a low credit score and problematic credit report can prevent them from purchasing a home, financing a new car, or getting a good interest rate on a credit card. However, what is not as clear is whether poor credit can affect your chances of getting a new job.

The short answer is, yes; bad credit could hurt your chance of getting hired. Some job seekers will be asked to agree to a credit check, and a negative report could prevent them from getting the job. However, the number of employers asking for a credit report is relatively small. According to a 2016 CareerBuilder survey, while 72% of employers conduct some sort of background check, only 29% will run a credit check. A number of factors will determine whether an employer will examine your credit history before offering you a job.

Why do employers ask for a credit report?

If your job will require you to handle money or assets, make fiduciary decisions, or have access to private data, the employer may obtain a credit report, especially if you are applying for a senior executive position. One reason is legal. If they do not , and an employee is later found guilty of embezzlement or theft, the employer could be involved in a negligence lawsuit if the court deems information in a credit report may have pointed to this potential danger.

What do employers look for?

Primarily, employers run credit reports because personal financial health can be an indicator of potential fraud. The Association of Certified Fraud Examiners (ACFE) found the top two behavioral red flags displayed by fraud perpetrators were employees who lived beyond their financial means (45.8%) or were experiencing financial difficulties (30%). Thus, if you are someone who has your credit cards maxed out, a mortgage payment that is higher than your take-home pay, an outstanding judgment, accounts in collections, or some other indication that you are barely making ends meet, you may be flagged as someone who may become desperate enough to commit fraud.

What is not included?

An employment credit history is different than the credit history a potential lender would receive. Equal opportunity laws ensure that your potential employer will not have access to:

  • Your credit score, which is a three-digit number that indicates how likely you are to repay a debt
  • Your date of birth
  • Account numbers
  • The number of inquiries on your credit report

The Process

The Fair Credit Reporting Act requires employers to obtain your permission before obtaining a credit check, so you will be asked to sign a release. Know that it is unlikely an employer will ask for a credit check unless you are a finalist for the position, so the request could be viewed as good news.

To obtain a credit report, the employer must explain why it is necessary for your employment. In 11 states, employers cannot use a credit history in an employment, recruiting, discharge or compensation decision unless the position has certain requirements, which vary from state-to-state. In California, for example, if the position involves regular access to $10,000 or more in cash, the employer can require a credit report. In Illinois, an employee must have unsupervised access to more than $2,500 in cash.

If something on your credit report leads the employer to deny your job offer, you have a right to obtain a copy of your report, the pre-adverse action notice, and a statement of your rights. You also have the right to challenge anything on the report before the denial of employment is finalized.

It is important to note that your credit report is just one factor dictating an employer’s decision to hire you. They will also consider your experience, education, references, certifications, and criminal history. Most employers are also aware that credit reports may contain incorrect information, and you will be given an opportunity to clear up erroneous information. Even if the negative information is correct, your employer may still allow you to defend your character and decide to offer you the job.

How can I keep a positive credit history?

Since a negative credit history could stop you from getting a job, you will want to improve your credit report. The top three things you can do are:

  • Pay your bills on time: late and missing payments are indicators that you could be experiencing financial difficulty
  • Do not use more than 30% of your available credit
  • Start establishing credit as soon as possible

Final Advice

If you are job searching, it may be a good idea to request a copy of your credit report. You can then make sure there is no incorrect or fraudulent information listed. If there is, you can contact the credit bureaus to have this information removed and your account notated. If you know what is on your report in advance, you will not have to worry about losing your dream job due to incorrect information.