Half of Employers Run Credit Checks

Can Employers Deny You a Job Because of Your Credit?

The short answer is yes. Employers can make hiring decisions based on your credit history. But there’s more to it than that.

Credit checks are fairly common when it comes to the job application process. According to a 2021 employer survey, 51% include credit screenings as part of their background screening process. However, credit checks are not universal, and for many jobs, your credit won’t play a role at all. Plus, employers who choose to check applicants’ credit must comply with rules laid out by the Fair Credit Reporting Act (FCRA).

Additionally, credit checks as part of the job application process are restricted in several states, and in certain cities, too. For example, in New York City, it is illegal for an employer to check your credit or ask you about your credit (or hire a third-party company to do so). Check your local regulations for the most current information, as federal, state, and local policies that govern employment-related credit checks are all subject to change.

Why Do Employers Check Your Credit?

Many employers who look at your credit history see a good record as a sign that you’re responsible. They may view heavy debt as a sign of financial difficulties that could make the applicant more likely to commit theft or fraud. Plus, credit checks help to verify your identity.

Employers hiring for certain jobs, such as cashiers, accountants, financial planners, government workers, and any role that includes access to confidential employee or customer information, may weigh credit information more heavily than those hiring for less sensitive positions. 

What Can Employers See When They Check Your Credit?

Employers get a general glimpse into your credit history when pulling your report, but these reports tend to exclude certain details that a full credit report would include. They don’t, for example, include your actual credit scores or current income. 

Here’s what employment credit checks do tend to include, according to Experian:

• Personal information, including your name, address, and Social Security number
• Past and current credit accounts, like loans and credit cards, including their balances and credit limits
• Payment history 
• Any bankruptcies or foreclosures 

So, though these reports aren’t as robust as those you can check on your own, they still paint a picture of your financial situation that can help employers determine how responsible you are with money.

How Much Can a Bad Credit Score Hurt You When Applying for Jobs?

Employers can’t see your actual credit score, but if you have a poor score, you likely have a less-than-stellar credit profile. The issues that led you to have a low score will likely be visible to employers who check your credit.

So, while a bad credit score itself can’t hurt your chances of getting a job, having a poor history with credit might. But the importance of the credit check varies based on the job and the employer. The type or severity of your credit issues may play a role, too. If you’re concerned about the effect of your credit history on your job search, make sure you’re prepared to explain any credit-related issues you’ve experienced.

What Are Your Rights When It Comes to Employment Credit Checks?

Employers that review applicant credit reports are bound by certain FCRA rules. Employers are required to inform you of your rights under the FCRA during the application process. 

Some of these rules include:

• Employers must get your permission to check your credit. If you don’t agree to a credit check in writing, the employer can’t pull your report.
• Employers must give you a copy of the credit report they reviewed. 
• Employers must tell you if you’re rejected due to your credit. They must also give you a copy of a document that summarizes your rights under the FCRA.
• Applicants must have time to explain or dispute credit-based rejections. If you think the credit information that led to your rejection is faulty, you can dispute the decision. You can also use this time to explain any legitimate issues.
• Employers have to provide their final decision after disputes and explanations are examined. At this point, employers must also provide the agency they used for the report.

How to Prepare for Job Applications If You Have Bad Credit

Applying to a job that requires a credit check can be intimidating if your credit health isn’t in the best of shape. Fortunately, there are ways to get ready that might help improve your odds of landing the position.

Check Your Credit and Dispute Errors

Even if you think your credit is in great shape, it’s important to check it yourself so you know where it stands before applying to a job where credit plays a role.

If you discover faulty negative information on your credit reports—for example, if someone opened and maxed out a credit card using your information—you can dispute it with the credit bureaus.

Disputes must generally be investigated within 30 days. So while the results won’t be instant, you should make progress within a few weeks. That’s why it’s a good idea to check your own credit report early in your job hunt.

Try to Boost Your Credit Quickly

Building excellent credit is generally a long-term process. Even so, certain strategies can help your credit faster than others.

Reducing your credit utilization is one option. If any of your credit cards have high balances, see what you can do to reduce them ASAP. 

You can also become an authorized user on someone else’s credit card. Getting added to a well-managed credit account with a low balance (or no balance) can boost your score, and the account may help your credit history look stronger overall.

Prepare an Explanation

If you’re applying for a job where credit is evaluated, make sure you can explain any issues with your credit history. As mentioned, you’ll be given the opportunity to do so. Of course, there’s no guarantee an explanation will sway the employer, but if your issues were caused by circumstances outside your control, it could be worth a discussion.