Bad credit can hinder job search, but doesn't always
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
Why do employers care
about my credit report? I have been unemployed for three months and used my
credit to get by. Now it's destroyed and I can't find a job, and I think it's
because of my credit problems. But if I had a job, I could pay it off! So what
do I do now? -- Mariah
Could a weak credit report impair
your ability to gain employment? While
it's possible -- and certainly worth exploring -- it may not be a factor at
It's true that many companies assess a
job candidate's report before hiring, and having one that looks terrific rather
than awful can work in your favor. But why would an employer pull your report
in the first place? They'd do it because they're looking for objective insight
into your character, financial acumen and overall level of stability. After
all, you may say you're a perfectionist, but if they see a bunch of unpaid
bills on your credit report, those words may not mean much.
Still, your concerns about the impact
of your credit reports may be having at this stage may be unfounded, especially
if you've yet to be invited in for a face-to-face interview.
There are many myths surrounding credit reports and employment. To get to the bottom of how they are really being used,
I spoke with Lester Rosen, president
and CEO of Employment Screening Resources, a credit reporting agency and human resources consulting firm based in Novato, Calif.
Employers don't randomly
access credit reports from all job applicants. They only do so for those who
are solid candidates, says Rosen. "If
they are pulling it, congratulations! They are doing a background check, and
that is good news, as they are seriously considering you for the position. They
won't run it before you are a finalist." He also says they aren't checked for
all occupations or industries. Most employers are looking at credit reports for
people applying for positions that are clearly related to finance or have
access to cash or credit. And in general, they don't access credit reports for
people applying for minimum wage jobs.
The only way an employer can pull your
report is with your permission. Therefore, if they ask, head over to the human
resources department and explain your situation -- you borrowed money and got
into a tight spot because you've been out of work. It's a temporary problem and
one that you will swiftly resolve when you are back to work as usual.
Do know, though, that a potential boss does not have access to the
same type of reports that lenders do. The ones employers
can see never include your credit scores or list your date of birth. All they
can view is your credit history. Oh, and
if you're concerned about how these credit report pulls may harm your report
further, you can relax. Unlike when a prospective creditor checks it, no
"inquiry" will be listed.
As for the real impact of your credit damage, Rosen recommends that you not worry about even that too much. "Our
experience is that employers are very sensitive to the fact that credit reports
are not perfect. And everyone in the world knows there is a recession, and employers
take that into consideration. It's a misconception that people are being
blacklisted because of their credit reports." However, if the employer does makes an adverse decision based on your
report, you have a right to know about it and get a copy of the report they
I do suggest obtaining your reports now
and checking them carefully for accuracy. There could be mistakes on them that
need correcting. Focus on paying on time, too.
Although high balances can be perceived as a problem, by making at least
the minimum payments on your accounts, you can establish good faith and appear
You've got a lot to do right now,
Mariah. Don't be distracted by things that might not really matter. With effort
and in time, you'll be receiving paychecks yet again -- and then you can concentrate
on creating a healthier financial future.
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Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: August 11, 2010