This article was last updated on February 2
Many employers, and certainly the larger ones, use a prospective employee’s credit history as a pre-employment screening methodology to judge their character and credibility. The reasoning is that your inability to handle your financial commitments may be a sign of personal irresponsibility, which may spill over into the workplace. For example, if your monthly debt expenses are significantly higher than your take home salary, an employers may be concerned that the adverse personal finance situation may distract you from your job performance.
Critics of using a person’s credit history as a job pre-screen are of the view that professional qualifications and experience should not be mixed up with a person’s credit history as a judgment of their job suitability. They believe that there is a very tenuous relation between bad credit and job performance. It’s a situation they have got themselves into due to poor or unfortunate financial decisions and need a job to pay down their debt and build back their credit score. Creating a no win situation where people require jobs but they can’t get one because of their bad debt creates a vicious spiral that leads towards growing numbers of long term unemployed and indebted which is a major strain on an already depressed economy and job market.
Employer groups however argue that a credit check is only one part of a comprehensive background check that is part of diligent employment strategy. So whether it is about verifying your credit or criminal history, a drug test or your education employers want to make sure that everything is place before they make the final offer. This is a prudent approach for the company and other employees, particularly if you are in a position of authority with access to sensitive data, cash and other valuable items.
Still, more than 80% of Americans are not aware that the credit history can be used for pre-employment screening purposes. So make sure that each time you sign an employment application you have read the fine print thoroughly. If you are not comfortable with this you can ask the employer about their policies right at the outset. On most occasions when you sign an employment contract there is likely to be a clause that you have granted the company and its third party vendors the right to perform background checks on you. But don’t lose heart if you have a bad credit history. It doesn’t necessarily mean that you are not ever going to get a job – particularly if you can provide a plausible reason for your poor credit.
Should you tell employers about your poor credit history or financial hardship at the outset? No – unless the job description specifically requests a good credit history. During your job search and early interview process there is no need to discuss your credit history. Why knock yourself out of the race prematurely? When they have firmly conveyed that they want you as an employee, you can make queries about their background check policies. This also gives you the opportunity to provide an explanation and justification for your credit and discuss steps you are taking to restore your financial credibility. If an employer really wants you they will be willing to overlook a poor credit score for the prospect of a strong performer.