Can Bad Credit Cost You Your Job?

Having bad credit is hard. Bad credit can make your life a lot more difficult than it needs to be in many different areas. If you have been battling credit problems for any amount of time then these statements will likely come as no surprise to you.

Some of the struggles which you may face when you have bad credit include difficulty qualifying for loans, problems receiving approval for credit card accounts, and the fact that when you are approved for new credit you will generally be subjected to higher rates and fees. Bad credit can even lead to higher insurance premiums and higher deposits on new utility accounts. Still one of the most painful and frustrating ways that bad credit can hurt you is when your credit problems cost you a job.

Credit Reports, Not Scores

First things first, there are a couple of common credit myths which need to be cleared up when it comes to employers checking your credit. To begin employers will not check your credit scores, only your reports. The idea that employers will ever view your credit scores is completely false.

Additionally, it is completely legal for an employer to access your credit reports under the right circumstances. The Fair Credit Reporting Act (FCRA) considers furnishing credit reports to be used for employment purposes to be a “permissible purpose” for a company to check your credit. The catch, however, is that an employer needs to have your written permission before a copy of any of your credit reports can be legally accessed. You of course have the right to deny the permission to have your credit checked, but if you do so the employer will probably exercise its right to deny you a new position or promotion in turn.

Also Read: Why Your Credit Scores Can Be Different with All 3 Credit Bureaus

Why Employers Check Credit

Employers use a lot of tools to screen applicants for new positions and promotions. For example, if you want to land a job then an employer may start out by asking you to submit your resume and attend an interview. If you successfully complete this stage of the screening process then the next step might be a requirement for references, the completion of a drug test, and perhaps a background check. Your credit is another tool which employers often use for screening purposes.

The idea that your credit could be evaluated whenever you apply for a job understandably does not sit well with many people. After all, there are plenty of people with bad credit who are wonderful employees. The fact that you had financial setbacks does not mean that you are not perfectly qualified to perform the job for which you are applying. However, there are also many studies which have shown that consumers with credit problems statistically make riskier and/or less responsible employees. As a result some employers may rely upon credit information to help vet applicants for new employment and/or promotions.

Also Read: CFPB Fines Equifax and TransUnion