August 12th, 2009

Credit Checks Can Hurt Consumer Job Opportunities

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Forget the impeccable suit, the strong handshake, and the perfectly crafted resume—nowadays, your credit report has to be as sharp as your first impression if you want to pass that job interview with flying colors.

According to the Society for Human Resource Management, up to 50% of employers run credit checks on potential new hires. Initially, credit checks were used by financial service companies and the government as part of pre-screening for employment; however, the practice has spread across all sectors of industry and every rung of the corporate ladder.

The theory behind employers running credit checks assumes that how you manage your finances can predict your job performance and character. Employers primarily look at two key components: financial responsibility and financial stability. Companies survey your payment history, amount of debt, and other details of your credit report to judge how responsible you are with your personal finances. This glimpse into a potential employee’s past financial behavior is especially important to small businesses, where a single incident of employee fraud or on-going employee theft could be a significant risk to the business. Companies would also assess your financial stability through specific credit data like your level of debt, past issues of paying off credit cards, and even an incident or risk of bankruptcy.

There are rumblings on Capitol Hill that using credit checks to pre-screen possible employees is penalizing those attempting to work their way out of their financial troubles. Lawmakers are also looking to provide additional consumer protection as we know there are times when consumer’s financial health takes a turn for the worse for reasons beyond their control. The Equal Employment for All Act which would bar employers from using credit checks as part of pre-employment screening, unless it is necessary and relevant to the employment position. Currently, most state laws allow employers (with the applicant’s permission) to pull a candidate’s credit history and refuse to hire or deny a promotion based on the credit checks.

If you are one of the nation’s 14.5 million unemployed consumers and you are turning to your credit card for life support, a future employer may judge your ever-expanding credit as too great of a risk to hire. With the average job hunt lasting anywhere from six to twelve months, you need to be prepared when any job becomes available. Work to keep your financial resume intact by using a credit card regularly, responsibly, and always paying on-time, develop a repayment plan for any significant outstanding debts, and check your credit report for errors.

Like your resume and references, a credit check needs to be buttoned up before you walk in for that first interview. Don’t let bad credit stand in the way of your next job. For the time being, managing your credit may be the fine line between a new job and the unemployment line.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

2 Comments

  1. Great work in tackling a topic that is not well-known to the public. A lot of job applicants might be wondering why they can’t seem to find employment despite their good career record. Well, bad credit might be the answer.

    CreditLendingBlog at 9:30 am on August 22, 2009
  2. Lawmakers are also looking to provide additional consumer protection as we know there are times when consumer’s financial health takes a turn for the worse for reasons beyond their control.
    ___________
    Allen

    Anonymous at 1:34 am on September 9, 2011

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