Blemishes on a credit report don’t just make it tougher to get a loan — they can also make it more difficult to get a job. Federal law permits employers to pull job applicants’ credit reports and to use the information within them as grounds for not hiring someone. In fact, roughly 47% of employers say they pull credit reports on some or all job applicants, according to the Society for Human Resource Management. If a credit background check reveals negative information, employers say, certain credit problems, such as outstanding judgments, accounts in debt collection and bankruptcy, are most likely to make them decide not to extend a job offer, according to a separate SHRM survey. The assumption is that a bad credit report might indicate poor work habits and decision-making.
Opponents of the practice question whether there’s a connection between a poor credit file and work performance. “Things that might make you have bad credit have nothing to do with whether you’re a liability,” says Hyman.
Job applicants have to be informed if their credit report will be reviewed. (At least seven states prohibit companies from conducting credit checks on many job applicants.) Under the Fair Credit Reporting Act, which regulates how consumer credit information is handled, companies must get permission from applicants in writing to check their credit reports. While applicants can deny the employer permission, they might want to consider instead explaining the circumstances that led to their credit problems, says Ulzheimer, since that may improve their chance of getting the job.