How and Why Employers Can Use Bad Credit Against You

by: Francis Achebe

In today’s tight job market, you need all the help you can get presenting yourself as the ideal candidate. Most of this comes from concentration on your resume, references and interview skills, but these days you could be sorry if you overlook another, all-important area – your credit report. When competition is tough, bad credit could be what tips the scales in another candidate’s direction. Get your credit report here.

Do Potential Employers Have the Legal Right to Pull my Credit Report?

Yes, and many do. According to a survey conducted by the Society for Human Resource Management, as many as 6 in 10 private employers pull credit reports for the purposes of hiring at least some of their candidates. As many as 13 percent of employers pull credit on all of their applicants. That said, some states have laws enacted limiting the rights of employers when it comes to pulling credit reports for potential or current employees. Check the rights specific to your state

Do Current Employers Have the Legal Right to Pull my Credit Report?

Yes, though it’s not clear how many are likely to pull a credit report for the purposes of evaluating a current employee. However, there may be reason to, from consideration for a promotion to grounds for termination.

Why Do Employers Base Hiring, Promotion and Firing Decisions on an Employee’s Credit Report?

Though there is no research supporting a correlation between credit history and job performance, employers evidently see things differently. Reasons cited for running credit reports on potential employees include fear of theft or embezzlement, being sued for hiring someone who turns out to be a bad egg, and general association between bad credit and irresponsibility. In other words, proven or not, some employers choose to associate bad credit with questionable character, which isn’t the most marketable of qualities.

For What Positions are Credit Reports Most Often Pulled?

Employers across all industries pull credit reports for hiring purposes, though the majority are limited to positions in which employees handle money and/or are privy to personal information, such as credit card numbers and social security numbers.

Will I Be Informed if an Employer Pulls My Credit Report?

Yes. In fact, your written permission is required to do so. This means you have the legal right to refuse, but by the same token, the employer has the legal right to dismiss you as a job prospect. On the other hand, if you do grant your permission, and the report turns out to be the reason for a hiring, promotion or firing decision, the employer is legally required to tell you so. Not only that, but they must disclose which credit reporting agency provided them with the report, as well as a copy of the report for you to review.

What Information do Employers See on Credit Reports for Current or Potential Employees?

What employers see on your credit report is essentially the same as what lenders see when they pull your report, with two notable exceptions. First of all, personal information is removed, such as sex and marital status. Also, if you make over $75,000 a year, the report employers see will include listings that fall off of the versions seen by lenders, such as bankruptcies more than ten years old, or lawsuits, judgments and paid-off tax liens more than seven years old. Also keep in mind that employers may see previous employers listed on your credit report. This is important to note, as they may see on your report an employer that you did not list in your job application – a discrepancy that could be viewed as an attempt to hide some sort of past employment.

What Negative Listings Weigh Most Heavily Against me With Employers?

​Poor credit in general can color an employer’s opinion of you, but the listings weighted most heavily against you are current outstanding judgments and accounts currently in debt collection. In other words, older, settled debt is unlikely to pose as much of a problem, even in the case of foreclosures and tax liens. What this suggests is that employers may be relatively forgiving of bad credit, provided it’s part of your past.