Editorial Policy

Don’t Let Bad Credit Hurt Your Job Search

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By Eva Norlyk Smith, Ph.D.
October 26, 2011

Looking for work? Depending on your chosen field, negative marks on your credit report could cost you a job.

Nearly four years into the economic downturn, layoffs continue to swell the ranks of the unemployed, and job hunters face stiff competition for a shrinking number of jobs.

Now, as more people compete for fewer positions, many employers are performing credit checks on prospective employees, disadvantaging job hunters with bad credit.

If your credit history is poor, it may still be possible to secure a position in your chosen field, say experts, but you will need to be more proactive in your job search.

Here are nine tips that can help you overcome the stigma of bad credit when job hunting:

1. Know which employers are likely to require credit checks.
If the thought of employers doing credit checks intimidates you, take heart in the fact that checking prospective employees’ credit isn’t a universal phenomenon. To a large degree, it depends on which profession you’re in, and it also varies from company to company.

According to a 2010 survey by the Society for Human Resource Management (SHRM), almost half of the companies surveyed (47 percent) look at the credit history of candidates for select jobs, but only about 13 percent conduct credit checks on all job candidates. Four out of 10 organizations reported that they do not conduct credit checks at all.

In nine out of 10 cases, employers will do a credit check on people applying for jobs that involve financial responsibilities, according to the SHRM survey. For senior executive positions, 46 percent of companies report that they check the person’s credit report, and for positions involving access to highly confidential employee information, about one third of employers pull reports.

Other professions where credit checks are more likely to be involved include government jobs (both on the federal, state and local level), as well as jobs for prospective firefighters, police, paramedics and other professionals who may have access to people’s homes.

2. Check your state’s laws.
Increasingly, states are introducing privacy laws prohibiting employers from running credit checks, except for a limited number of specific professions.

According to Beth Givens, Director of the Privacy Rights Clearing House, a nonprofit consumer advocacy organization based in San Diego, CA, six states already have laws in place that curb credit checks on prospective employees. These include Illinois, Hawaii, Oregon, Connecticut, Washington and Maryland. In January 2012, California will join that list, and more states have pending legislation limiting employers’ ability to perform credit checks on job applicants.

3. Pull your credit reports.
Most people have a general sense of what’s in their credit report, but reviewing your report is important when preparing to apply for jobs.

“Obtain a copy of your credit report from all three credit bureaus and become familiar with what is on those reports,” Givens recommends. “It’s important that you know exactly what employers will see.”

You are entitled to a free copy of all three credit reports once a year at AnnualCreditReport.com. Keep in mind that certain information on credit reports is not available to employers, including your credit score and sensitive financial information.

4. Know what employers consider important.
When evaluating credit reports, employers look at reports in a different way than banks and other prospective lenders.

A bank, for example, would consider a home foreclosure to be a deal-breaker if considering an applicant for a mortgage loan. However, according to the SHRM survey, only 11 percent of employers consider home foreclosures when making hiring decisions. In addition, survey respondents said that medical debt was not a factor in their decision making.

What do employers consider to be a deal-breaker? According to SHRM, 64 percent of companies surveyed said their hiring decisions would likely be affected if an applicant had outstanding judgments from prior lawsuits. And half of the organizations surveyed said they were likely to pass on applicants with accounts in debt collection.

5. Know when to broach the topic of your credit history.
In general, if you have bad credit and apply for a job with a company that is likely to check your credit report, you want to be the first to broach the topic. However, don’t bring up the topic unless you think it will be an issue.

“If you’re applying for a job where your credit history matters, you’re better off bringing up the topic sooner rather than later,” says David Couper, a career coach and author of “Outsiders on the Inside: How to Create a Winning Career When You Don’t Fit In.” “However, if credit checks are not routine for your profession, you also have to look at the organization. Bigger companies tend to have more policies and guidelines, while a small company may not run those checks at all.”

6. Explain the larger context.
There are a million reasons why people run into financial trouble. In today’s economy in particular, credit problems often speak more to the state of the economy than about your ability to handle money.

Employers realize that. According to the SHRM survey, among employers doing credit checks, 87 percent said they may allow candidates to explain the circumstances that led to the bad marks on their credit report.

If extenuating circumstances, such as medical expenses or long-term unemployment, played a part in your financial troubles, let your prospective employer know. Providing the context of how the events unfolded can go a long way toward making prospective employers take a different view of your credit problems. If you are able to demonstrate that your bad credit is not a sign of irresponsibility or inability to manage money, but due to circumstances beyond your control, it can often counteract any bad impression that a poor credit history would otherwise create.

7. Show how you are taking care of the situation.
Describe the steps you are taking to deal with your debt. Many people understand that bad things happen to good people. Be confident and demonstrate that you’re dealing with the problem effectively. Employers need to feel confident that ongoing financial problems won’t distract you in your new job.

8. Focus on how qualified you are for the position.
Your credit history doesn’t necessarily reflect on your ability to perform well on the job. By giving a strong interview and illustrating how perfectly your strengths line up with job requirements, you may be able to convince a potential employer to look past bad credit.

9. Use networking and recommendations to your advantage.
A vote of confidence from a reliable source can score you a job that otherwise may be out of reach. Personal recommendations are likely to sway an employer’s opinion and can compensate for a dissuasive credit history.

“The more you can capitalize on personal contacts, the better,” says Couper. “If you have a personal contact with the hiring manager, they are more likely to not be concerned about your credit history. If you apply online where people don’t know you at all, it will be more of a problem.”

(Story updated 10-26-2011. Originally published 11-10-2009.)