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Does Credit Affect Employment?

Many employers include credit reports in their background checks of prospective employees. In some situations, an employer will use a low credit score as a reason for not offering a job to an otherwise qualified applicant. As the Great Recession continues, large numbers of people who have always paid their bills on time and managed their debts responsibly are finding themselves unable to keep up with all of their monthly payments for the first time in their lives. Illness, work-related injuries, and unemployment can all affect a family’s financial stability. Getting behind on paying bills or defaulting on debts can have an impact on future employability.

There are several reasons that an employer may request credit reports on job applicants. Credit reports contain valuable information besides bill payment histories that employers find useful in evaluating a job prospect. Credit reports can be used to verify past employment and to verify social security numbers to confirm identity. Employers also use the credit report as an indicator of the job applicant’s financial responsibility. Even though millions of people have been affected negatively by the recession and have flawed credit reports after decades of responsible financial behavior, employers will sometimes use low credit scores to refuse employment to an applicant.

The type of job the applicant is seeking may determine how much weight an employer places on the applicant’s credit score. Positions involving national security will almost certainly require an extensive background check, including credit reporting. Job applicants with bad credit will likely not be able to get jobs involving sensitive national security information, and existing security workers who develop bad credit ratings are likely to lose their jobs, since workers under severe financial stress are more likely to become security risks. Applicants for jobs that involve significant financial responsibility are likely to be turned down for employment if they have low credit scores. Supervisory jobs or jobs requiring access to cash in banking, the securities industry, jewelry manufacturing, and the gaming industry all require excellent credit scores.

There are some legal protections for job applicants with respect to credit checking. Some states, including Hawaii and Washington, do not allow employers to use bad credit as a reason to deny employment. Some members of Congress have been trying to get similar legislation enacted at the federal level. Currently, federal law does not allow hiring discrimination due to a previous bankruptcy, although bad credit behavior leading up to the bankruptcy can still be used against a prospective employee. Also, employers cannot legally obtain a credit report without the applicant’s written permission. An applicant can refuse to grant access to her credit records, although the refusal itself could be grounds for denial of employment.

Job applicants with poor credit histories can take steps to minimize the impact of bad credit when seeking employment. Annual or semi-annual checks of personal credit reports can often reveal errors in reporting that can be corrected. Open and honest communication with prospective employers about recent credit problems can also go a long way towards minimizing the impact of bad credit on a job application.

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