Don't Let Bad Credit Impact Your Job

Why it's important
A pristine credit report can provide an edge in seeking employment, and a bad report can cost you your dream job.

More and more employers are using credit reports to screen employees. The use of credit checks has increased 55 percent since 2000, according to a 2006 national survey conducted by Harris Interactive for Spherion Corp., a leading recruiting and hiring firm. The survey found more than a third of companies were checking credit reports in 2004.

Employers can ask to see your credit report if you are a job applicant or being evaluated for a promotion, reassignment or retention, according to the Federal Trade Commission. However, the employer must have your written permission.

Employers left with a bad impression have to notify you of this and provide you with a copy of your report as well as a summary of your rights. If they've chosen someone else for the job or taken an adverse action, such as a dismissal and the report influenced the decision, they will have to notify you and provide contact information for getting a free credit report. The report is free for 60 days.

Mallary Tytel, president of Healthy Workplaces, a job consulting firm, says employers focus on five characteristics: accountability, commitment, critical thinking, interpersonal skills and personal integrity. All of these, she says, are explicit or implicit in a credit report.

Maxine Sweet, vice president of public education for Experian, one of the three major credit repositories, explains that "many companies use credit reports primarily for authentication of the name and address history of the applicant, perhaps paired with a separate search of criminal history, rather than for the credit performance of the individuals being considered, especially if there are no significant credit issues."

Once an employer has the applicant's permission, a credit reporting agency, background screening company or reseller, which is an independent credit reporting agency that repackages credit information from a major credit bureau, is used to get the credit information. According to the FTC, these entities must make sure the employer is getting the information for permissible purposes.

Employers, however, will receive a modified version of the report where the date of birth, spouse's name and account numbers are removed, says Sweet.

"The first two are removed to help employers comply with the Equal Employment Opportunity Act, which does not allow age and marital status to be considered for employment. The account numbers are removed because they aren't needed for employment purposes and as a matter of security," she says.

What to do
Get copies of your credit report well in advance of applying for a new position. Get free annual credit reports from the three major credit bureaus when you brush up your resume. Fix any errors in the report.

Ask the employer the purpose of the credit check and which avenue they are using to attain the credit report. To establish open and honest communication, explain any credit mishaps prior to letting the employer review the report. Provide proof, if possible.  

Applicants who discover they are victims of identity theft upon receiving copies of their reports from their prospective employers can take steps to alleviate the problem.