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In today's job market, your resume isn't the only factor employers consider. Your financial history, including your credit score, can significantly impact your job prospects. Many job seekers with bad credit are unaware that their creditworthiness could be a deciding factor in landing a position. With numerous states allowing employer credit checks, a poor credit report may become an unexpected barrier to employment.
This post explores the intersection of financial health and job opportunities, examining how credit checks influence hiring decisions. We'll also offer tips for job seekers struggling with bad credit, helping them navigate this often-overlooked hurdle in their job search.
If you'd like to skip the article and speak to a debt specialist, get a free consultation today!
What is a Credit Score and Credit Report?
Your credit score is a numerical value that represents your debt, amount of debt, history of debt, and your repayment history. Your credit report details all your financial activities for at least the past ten years. Credit history is the information included in the credit report. The single most important factor is whether you consistently make late payments. Timely payments drive your credit score up!
Financial institutions and employers both use credit reports to assess risk, with bad credit potentially affecting loan approvals and job prospects. Understanding this connection can help job seekers prepare, especially those working to improve their credit standing.
Is an Employer Background Check the Same as an Employer Credit Check?
No. A background check looks at your personal history which can include your social security number, full name, date of birth, education, criminal history, and address. Background checks can be very basic or very detailed - it depends on what the employer needs to know and if you are applying for a security clearance.
To obtain this information and perform a background check, they legally need your permission. If you are going to drive a company vehicle, the employer may also request a copy of your driving record.
Can Employers Check an Applicant's Credit Report?
Credit checks in hiring vary by state, with only 11 states banning the practice in most cases. Employers typically review payment history, debt amounts, and credit lines, not personal details. Those with bad credit may face challenges, as the Fair Credit Reporting Act allows employers to check credit with written permission. While applicants can refuse, it might cost them the job opportunity. Understanding these rules can help job seekers with credit issues better navigate the application process.
What Happens if You Are Denied Employment Due to Bad Credit?
If bad credit affects your job application, federal law requires employers to notify you. They must provide a "pre-adverse action notice" and your credit report, allowing you time to explain your situation. Those with bad credit can use this opportunity to discuss their improvement efforts. If rejected, you'll receive a "post-adverse action notice" with details on obtaining your full credit report. Understanding these steps can help job seekers navigate the challenges of credit-related employment decisions.
Why Do Employers Check Your Credit?
Employers often view bad credit as a sign of poor responsibility. Late payments might suggest workplace unreliability, while high debt could raise misconduct concerns. Some worry that personal financial mismanagement might extend to company resources.
Can You Get a Security Clearance With Bad Credit?
Bad credit can impact security clearance and job prospects in finance, government, law enforcement, IT, and roles involving sensitive assets. These sectors often require credit checks. Job seekers with bad credit should be aware of these requirements and work on improving their financial standing.
Does a Pre-Employment Credit Report Hurt My Credit Report?
Generally, only “hard pull” credit report requests will temporarily decrease your credit rating. “Soft pull” credit reports do not harm your credit score.
Since pre-employment credit reports are considered soft, your credit score should not be affected.
Can You Get a Job with Bad Credit?
The short answer is yes you can get a job with bad credit, but it depends on the type of job that you are applying for. Do you need a work-from-home side gig? Browse our Work From Home Online Side Jobs That Pay Good
How Low is Too Low for a Credit Score?
Credit scores range from 300 (very bad) to 799 (excellent), with most falling in the "Good" range of 670-739. Employers often prefer candidates without bad credit. If your score is low, check reports from all three credit bureaus and work on improving it. Addressing bad credit can boost both your job prospects and financial health.
How Much Debt is Too Much?
This depends on your income and all your debts. If you add together all your debt and divide it by all your income (debt to income ratio), it should be less than 0.30 or 30%.
Learn How to Fix Your Credit Health
If your financial history and credit scores are less than stellar, there are some steps you can take to improve your financial position as you conduct your job search.
- Get a free credit report from each credit bureau: Equifax, TransUnion, and Experian. You have legal rights to get a free copy once a year from the three major credit bureaus. Learn about Why Your Equifax Credit Score is Lower Than TransUnion
- Inspect your report for any errors or inaccuracies. Correct any in writing through certified mail.
- Pay bills in full on time, every time. This has a huge effect on your credit score!
- Pay down loans as much as possible.
- Avoid increasing debt by taking out another loan or credit card.
- Be upfront if your potential employer requires a credit history. During the hiring process, explain why you have a bad credit history and bad credit score and what you are doing to solve it.
The Federal Trade Commission allows you to dispute the accuracy and completeness of your credit report and requires the credit bureaus to make corrections.
What's Included in an Employment Credit Check
An employment credit check is different than a full credit report you might get as a consumer. Here's what employers typically see:
- A record of any late payments
- How much debt you currently have
- The amount of credit available to you across cards/loans
Importantly, employers won't see sensitive information like your full social security number, account number, or date of birth. They also won't see your exact credit score number.
Credit Score Cutoffs Used by Employers
While every employer is different, here are some general guidelines on what credit scores may cause concern:
- 700+ - Generally considered excellent credit. Unlikely to impact job prospects unless the role requires pristine credit.
- 650-699 - Still relatively good credit. May only be an issue for sensitive financial or government roles.
- 600-649 - Approaching risky territory depending on position. Should address credit issues.
- Below 600 - High risk range. Likely to severely hurt prospects across most industries.
State Laws on Employment Credit Checks
While most states allow pre-employment credit checks, 11 states have laws prohibiting or limiting their use:
- California
- Colorado
- Connecticut
- Delaware
- Hawaii
- Illinois
- Maryland
- Nevada
- Oregon
- Vermont
- Washington
Be aware of the laws in your state, as they impact what employers can see and what rights you have.
Building Credit When Job Hunting
Here are 5 proactive steps to take while looking for work to offset negative credit marks:
- Review all 3 credit reports and dispute inaccuracies
- Pay down balances below 30% credit utilization
- Set up automatic payments for ongoing bills
- Limit credit applications until employed
- Contact creditors to adjust payment plans (avoid further issues)
FAQs
Conclusion
A good credit history can improve loan rates and job prospects. Before job hunting, check your credit reports and fix errors. If you have bad credit, focus on timely payments, reducing debt, and avoiding new loans. Improving bad credit takes about a year, but it's achievable. These efforts can enhance your financial profile and employment opportunities.
If you face an employer credit check, explain why your score is lower than you might like what you are doing to improve it, and any other relevant details. Most employers will appreciate your honesty during the hiring process.
If you have too much debt and can't make even monthly payments, you may need more help from a company that specializes in credit counseling or debt settlement. Pacific Debt, Inc. can help you find a solution to your debt and help you clean up your finances.
Pacific Debt, Inc.
Pacific Debt Inc. is one of the leading debt settlement companies in the US. We help you understand all your options and whether or not debt settlement is the best option. If it is not, we will refer you to a trusted partner who may be more appropriate for your unique financial situation.
If you'd like more information on debt settlement or have more than $10,000 in credit card debt that you can't pay, contact Pacific Debt, Inc. We may be able to help qualified candidates become debt-free in 2 to 4 years and we've settled over $300 million in debt for our customers since 2002.
For more information, contact one of our qualified professional debt specialists today. The initial consultation is free, and our debt experts will explain to you all your options.
Pacific Debt Service Area
Pacific Debt is currently providing debt relief coverage in the following states:
Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia, Florida, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Mexico, New York, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Virginia, Wisconsin
* Other states can be connected to one of our trusted partners
For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will explain to you all your options.
*Disclaimer: Pacific Debt Relief explicitly states that it is not a credit repair organization, and its program does not aim to improve individuals' credit scores. The information provided here is intended solely for educational purposes, aiding consumers in making informed decisions regarding credit and debt matters. The content does not constitute legal or financial advice. Pacific Debt Relief strongly advises individuals to seek the counsel of qualified professionals before undertaking any legal or financial actions.
