Can a Credit Blemish Keep You From Landing a Job?

If you're looking for a job or thinking about changing employers, don't neglect to review a document almost as important as your resume: your credit report.

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One-third of us who are lucky enough even to have work in this time of stubbornly high unemployment hate our jobs. A recent survey found that 32 percent of workers are “seriously considering” jumping ship, even though there were 4.3 unemployed people for every position available last month. In other words, you have to hit it out of the park if you want to get a job these days. But when you polish up your resume, don’t neglect to review an equally important document that can impact whether or not a hiring manager will give you a fair shake.

That document is your credit report. According to a poll conducted last year by the Society for Human Resource Management, 47 percent of employers use credit screening for certain jobs. These jobs are often ones that involve handling large amounts of cash or having access to financial accounts or confidential consumer data, according to John Beaudette, vice president and operations manager for Employment Screening Services, Inc. An additional 13 percent of respondents to the SHRM poll use credit checks for everyone. This number is actually an improvement; in a similar poll conducted in 2004, 19 percent of respondents said they checked credit before hiring anyone. At his company, Beaudette says only 15 to 20 percent of clients request credit information as part of a pre-hiring background check.

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Unfortunately, circumstances beyond your control — a prolonged job loss, a medical crisis — can lead to bills piling up and missed payments. Beth Givens, director of the Privacy Rights Clearinghouse, asserts that credit checks shouldn’t be used at all. “There are so many different reasons why one’s credit report is simply inappropriate for use by employers to make hiring decisions,” she says. “They’re making a value judgment that says your financial health determines your character. They’re using it for character assessment, which is totally invalid.” People who are in favor of credit screening counter by saying that people with terrible credit might be tempted to embezzle money, sell confidential data or be open to bribery.

It’s important to note that employers can’t actually see your three-digit credit score; as a result, there’s no “magic number” that will make a company accept or reject an applicant. But Beaudette says certain types of information like unsatisfied judgments and liens can be red flags. Although the version of your credit report that employers see doesn’t include other information that could potentially lead to discrimination such as your age, they can see if you’ve accrued medical debt. “I think that would give the employer a reason to create an excuse not to hire that person,” Givens says.

The good news is that this trend may be on its way out if some lawmakers have their way. Currently, four states — Hawaii, Washington, Oregon and Illinois — have passed legislation limiting the use of credit information in employment background; similar legislation is on track to kick in later this year in Connecticut and Maryland, and several other states have introduced related bills. Advocates like Givens are hopeful that a bill currently in the House of Representatives will replace this patchwork of state-level legislation.

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The trend also seems to be dying out on its own, Beaudette says. Five years ago, twice as many clients requested credit checks as today. “My sense is that employers are seeing that this isn’t quite as open and without repercussions,” he says. “I think we’re all scaling back now and promoting responsible use of it.”

For now, though, job-seekers have to fend for themselves. Order a free copy of your credit report from each of the three bureaus at annualcreditreport.com and check it for errors or outdated negative information that should be erased. If your credit is blemished and a prospective employer wants to check it, be up-front, both Beaudette and Givens say. Explain briefly that negative items are on there, what extenuating circumstances caused them and articulate how you’re working on repairing your credit.

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