Credit Checks and Employment

How Your Financial Past Can Hurt Your Job Search

By Dona DeZube, Monster Finance Careers Expert

Many companies check job applicants’ credit as part of the background check. Some also check credit histories when employees are considered for promotions, so you can’t assume that because you have a job at the company, your personal information is going to remain personal.
Unless your employer is located in one of the seven states that restrict employer-run credit checks in some way — California, Connecticut, Hawaii, Illinois, Maryland, Oregon or Washington — there’s not much you can do about a credit check request other than refuse permission. Employers concerned about federal discrimination law will check credit only when there’s a business need to do so – for example, you handle cash, you have a corporate credit card, you’ll be told corporate secrets.

Your Finances

Before a potential employer can pull your credit history, you must sign a release. The report the company gets will be just like a regular credit report, but some credit services, such as Experian, remove information employers aren’t allowed to consider — such as age and marital status.

What is going to show up? Delinquencies, bankruptcies, judgments, liens and a list of your loans, mortgages and credit-card accounts — this is where your underwear preferences can become fodder for the officegossip hotline. If you open a charge account at Victoria’s Secret and spend $1,000 a year there, that line of credit will appear on your credit report.

Be Prepared

Find out what’s in your credit report before you start your job search. Obtain a copy of your credit report from each of the three credit services – EquifaxExperian and TransUnion – so you’re not blindsided by an inaccurate item that you don’t know about until an interviewer asks. Under an amendment to the Fair Credit Reporting Act, you can access your credit report for free once every 12 months.

If there’s a mistake on your report, contact the creditor that made the error, clear it up and ask that agency to report the mistake to the three agencies. If there’s adverse information about unpaid student loans, charge-card bills or bankruptcies on your report, don’t waste your time and money on credit repair schemes. You can’t erase the truth from your credit file. But time heals all wounds; most bad credit incidents will disappear from your record after seven years.

Get Your Story Straight

What can you say when you’re asked about poor credit? Your best bet is to keep your answer short, sweet and sincere. Acknowledge the error of your ways. Assure the employer that there was a one-time problem and you’ve changed. For instance, you might say: “I came from humble beginnings, and when I went away to college, I’d never had any experience with credit. I got overextended, and that was wrong, but I learned a lesson and worked hard to pay off all my debts. Since then, I’ve had clean credit and I hope this won’t hold me back, because I really want to work for your company.”

If you are turned down for a job because of credit problems, the employer has to give you a copy of the report and explain your rights under the Fair Credit Reporting Act.

Don’t Trip Up

There is one other way a credit report can trip you up. When you apply for a new credit card or loan, you provide information about your current employer. That information is passed along to the credit reporting service. If you leave a job off your resume and it appears on your credit report, someone may notice the discrepancy. That’s another good reason to pull your own report from all three companies before you start interviewing.

Is It Fair?

If you have poor credit, public opinion may be swaying in your direction because so many people had their credit worsen during the Great Recession. Experts also say employment-related credit checks disproportionately affect women, Hispanics and African Americans — three groups more likely than white men to have poor credit — making some employers worry that they’ll be charged with discrimination if they check credit without a good reason.

If credit checks are derailing your job search, try applying for work with smaller companies where the hiring process isn’t standardized and there are no professional human resources folks to suggest credit checks.

Global Staffing Associates, LLC