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Can Your Credit Score Cost You a Job?

Jan 25, 2010 Jennifer Williamson, Distance Columnist | 0 Comments

It’s a cruel Catch-22 situation that’s becoming more common in today’s difficult economy. You lose your job. Your bills pile up. Your credit record goes south. And then you have trouble getting a new job—because of your credit.

It might sound outrageously unfair, but it happens every day. Your credit score can cost you a job. Here’s a look at why companies do this—and what you can do.

Reasons Why Companies Check Your Credit

Because they’re hiring you in a position that deals with money. Financial firms, insurance companies, and corporations that are hiring you in a role of significant financial responsibility defend their right to check credit on prospective employees. They need someone who is, first and foremost, fiscally responsible as a basic requirement of the job—and according to them, a prospective employee with a bad credit history may not be the best person to control their own finances.

To prevent fraud 

Some companies feel that employees with serious money management problems are more likely to steal or commit fraud—they have a lot of bills to pay, and they’re more likely to be pushed into it out of desperation.

To prevent lawsuits

Some companies believe that an employee with money troubles is more likely to steal from a customer or client as well—and in some lines of work, employees are sometimes put in positions where that’s possible.  In a case where this happens, the client or customer may be more likely to hold the company responsible than the individual who did the stealing—because the company has more money, and was responsible for hiring the thief in the first place.

Credit History

Your Rights Under the Law

Employers can’t check your credit without your permission 

Under the Fair Credit Reporting Act, anyone who wants to check your credit needs your permission in writing. You might be in a bind here since you probably won’t get hired if you don’t give permission. But if a company doesn’t ask for it before they run a credit check, it’s a violation of the law—and you may have some options if you lost the job because of it.

You can’t be passed over because of a bankruptcy

Title 11 of the U.S. Code states that employers are not allowed to discriminate against you if you have a bankruptcy on your record. Of course, if it comes to a lawsuit, the employer can always tell the courts that it wasn’t bankruptcy that gave them pause, but your record of unpaid bills leading up to it. But if they do tell you that you weren’t hired because of the bankruptcy, you may have some rights in court.

The employer is required to tell you if you weren’t hired because of your credit

This also applies if you’ve had a job offer retracted, if you’ve been fired, or if a promotion is canceled because of your credit report. According to federal law, the employer needs to give you a copy of the credit report as well as an explanation of your legal rights. They also have to tell you what credit company gave them the report, that company’s contact information, and an explanation of the fact that you have the right to contest the report’s contents.

What You Can Do

Check your credit first 

Forewarned is forearmed. Check your credit through Equifax, Experian, or Transunion. Know what parts of your credit report might cause employers to think twice about hiring you. If you can, work toward repairing your credit as much as you can.

Take the opportunity to explain

Technically, a company has to get your permission to check your credit. If they do, give it to them—but have an explanation ready. This is the one chance you’ll have to tell them what they might see on your credit before they check it—and let them know what your circumstances were.

Most companies who check your credit are looking for signs of irresponsibility—they’re not looking to be unjust. If you can reassure them of your responsibility and cast your credit report flaws in an understandable light, they may not use the information against you in a hiring decision.



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