Poor Credit & Jobs

Being a job seeker with poor credit is a catch-22. Many employers run credit checks on prospective hires as part of the hiring process. And, unfortunately, poor credit can sink your chances of landing a job. Critics state that such a practice is discriminatory because creditworthiness is not an indication of an applicant's job qualification. Some states propose limiting credit checks as a basis to hire and fire.

Credit Checks and the Hiring Process

Credit checks as part of the hiring process are perfectly legal, although a credit check may seem unfair, especially if a job seeker has poor credit due to past financial struggles. Reviewing your credit score, reference and past employment information fall under the umbrella of background checks. A bad credit score might limit your employment opportunities even though you may be the right candidate for the job.

Why Companies Run Credit Checks

According to the Society for Human Resource Management, 60 percent of the employers it surveyed for its November 2009 report said they conduct credit checks as part of their hiring process. Most said they only do so on a select group of candidates and check as far back as six or seven years. The survey participants said they look for judgments, accounts in collections and bankruptcies. Employers argue that a credit check is a useful screening tool, particularly for job candidates whose responsibilities include handling money, such as a cashier, or having access to sensitive materials. Still other companies use credit checks on a perfunctory basis to gather such information as education, past employment and driving record.

Argument Against Credit Checks

According to many consumer rights groups, denying a job seeker employment because of his bad credit is not only discriminatory, but also hampers the economy. Critics argue that an applicant's credit history has no bearing on his job performance or abilities. Some states have even decided to ban or limit the practice. As of 2011, several states have passed or proposed laws restricting the use of credit scores as a factor in employment.

Your Rights

You have the right to know what's in your credit report and dispute any false or inaccurate information. In addition, you are entitled to a free copy of your credit report every 12 months under the Fair and Accurate Credit Transactions Act (FACTA). Before you start your job hunt, obtain your credit report and check if for any inaccuracies, false or missing information. Under the Fair Credit Reporting Act (FCRA), if a potential employer intends to run a credit check on you, it must get your permission. If the company denies you employment based on your credit report or score, it must provide you the name of the credit rating agency it used plus give you a copy of your credit report. The company must also pass along a copy of "A Summary of Your Rights under the Fair Reporting Act," the document recommended by the Federal Trade Commission.