If you’re trying to find a job, the last thing you need is bad credit getting in your way. There are many reasons why people end up with a poor credit rating and it can be hard to get around these issues when you’re trying to find work. However, being denied a job because of this reason can burrow you deeper into debt and make it harder for you to recover financially.
In this article, we will answer the question of whether an employer can deny you a job if you have bad credit. We will also share some tips to help you get past personal finance problems so that they're not holding you back from achieving success in your career.
Yes, Bad Credit Can Lead To Being Denied A Job
You have a bad credit history and one way to recover from this is to find a good job to help you pay your bills. Unfortunately, many employers will check an applicant's credit report before they extend a formal offer of employment. The problem is that this requirement often leaves out many qualified candidates.
While there are already companies that do not necessarily use credit as the primary reason to deny someone employment, it is still possible for your application to get turned down because of your bad credit history. This is more common in high-paying jobs, top-level positions, public service roles, and jobs where the employee has to directly deal with money.
You might be asking: Is this even legal? The sad truth is that in the United States, only 11 states have laws banning employers from discriminating against job applicants based on their credit history namely: California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont, Delaware, Nevada, Colorado, and Washington. However, there are also exceptions depending on the job role and the circumstances.
So, if you are applying for a job in a state not listed above, there are currently no restrictions on whether an employer can deny you a job or not based on your credit history.
Why Do Employers Check Your Credit Score?
There's a lot of information that employers need to know about potential hires just to be sure they're getting someone who is right for the job. Most employers request a background check to verify your identity, education, job history, criminal history, and other relevant details that you may or may not have disclosed during your application. Having these details helps them determine if you're a good candidate.
One additional requirement that an employer may request from you is access to your credit report. Take note that because of the Fair Credit Reporting Act, an employer has to get your permission to check your credit before they can access it. If you agree, the employer will be able to see information about your credit.
So what does an employer credit check show? Typically, employment credit checks will not show your credit score but will show information including your open lines of credit, outstanding debt, payment history, loans, foreclosures, and bankruptcies. They may also be able to see past work history and legal information, if any.
You might be wondering why employers check your credit report in the first place. The primary reason for most employers is that they want to be sure of who they're hiring and checking your credit is just one more step in the process. Your credit report can give valuable insight into your financial past.
This is not necessarily because they don't trust you; it's more likely because companies want to see if you had financial problems in the past and how those problems were handled.
For example, you are applying for a financial position or a role where you will be directly dealing with money. The employer may want to have access to your credit to see what kind of person you are when it comes to managing money responsibly since the report reflects your payment history.
If the employer sees that you have a poor history of managing your own finances, it can give them doubt whether you can manage the finances of a bigger company or organization.
How To Get A Job With Bad Credit History
You have a bad credit history due to your difficult financial hardships. That means you can't find a job, right? Wrong. If your bad credit history is making it hard for you to get employed, it happens more often than you think. Don’t worry because there are ways to get around this problem and find a job anyway.
The problem is that most people don’t even realize they can still find jobs despite their poor financial history. You just need the right knowledge of what you should do and where you should find jobs that will accept your application despite having bad credit. Once you know how to go about getting a job with bad credit and what your options are, you can breathe easier and focus on getting hired.
1. Ask Potential Employers What Their Hiring Policies are Before Applying
Don’t go blind when pursuing a job application. Knowing what kind of information an employer might ask for could help prepare you better before applying and it will also save you time. If you are applying through a headhunter, ask the headhunter what the complete job requirements are and if it will include a credit check. If they ask you the reason, mention that you are currently rebuilding your credit so you need to know whether this will be an issue during your application.
If you are applying online, the full requirements might not be reflected in the online job boards immediately. Apply anyway and if you are called in for an interview, take that opportunity to ask about the requirements and hiring policies.
2. Focus on Your Strengths
When you are building your resume and your cover letter, make sure to focus on your strengths. Tailor-make your application documents to reflect the job requirement. By putting together an extensive resume that talks about your skills and experiences, you can make a better case on why an employer should hire you even with a poor credit history.
3. Inform Your Employer of Your Financial Situation Beforehand
If you have a valid reason why your credit history is in a bad shape, it is best to be transparent with your employer about it. Many employers appreciate honesty and transparency when it comes to hiring prospective employees. By volunteering the information yourself rather than waiting for them to find it out anyway, you will have an opportunity to tell them firsthand about what happened and what you are doing now to improve your current financial situation.
For example, if your late payments were caused by an unavoidable financial difficulty like a serious illness, accidents, or unexpected expenses, telling your employer this and providing an explanation can soften the blow. Your honesty will be appreciated and most likely create trust in you.
4. Apply for Jobs that Don't Require a Credit Check
There are indeed certain jobs where a credit check is more important than others. Some of the jobs where a credit check is important include accountants, financial planners, government workers, law enforcement officials, lawyers, casino workers, and any job where you are dealing directly with large amounts of money. It is then best to avoid applying for these jobs if your credit is still in bad shape.
However, there are also many options where you can still get employed even if you have bad credit. You can even apply for work from home jobs with no startup fee. Some of the jobs that you can apply for include the following:
- • Rideshare driver
- • Virtual assistant
- • Content Writing and Editing
- • Freelance Graphic Design
- • Social Media Assistant
- • Transcription Jobs
- • Translation Jobs
- • Online Tutoring
- • Customer Service Jobs
- • Website and App Tester
- • Video Editors
Tips On How To Improve Your Credit When Looking For A Job
Another way to get over the hurdle of being denied employment because of your credit score is to take steps to improve your credit before applying. Improving your credit score has many benefits. Aside from making it easier for you when it comes to applying for a job, you may be able to lower your mortgage or car loan interest rates, and you'll have an easier time opening a new credit card account later on.
For many people, this process can seem overwhelming and a little frustrating as you go through all these steps. However, you’ll be surprised that doing this can significantly improve your credit.
1. Check Your Credit Report for Errors
If you're looking for a job, make sure to check your credit report before applying. You can order a free copy of your credit report from annualcreditreport.com. When you get your credit report, carefully check every item. You should also keep an eye out for possible errors in the information listed on the report such as false entries or incorrect balances that could hurt your score by creating a negative balance.
According to research by the Federal Trade Commission, 1 in 5 people had errors on their credit reports. If you find an error, you can dispute this and it can improve your score. For example, if you find a late payment on your credit report which was reported inaccurately, you can follow these steps on how to delete a late payment from your credit report.
2. Make Timely Payments on All of Your Accounts
To maximize your credit score, make timely payments on all of your accounts. Payment history is one of the five major factors that influence your credit scores. If you have a lot of late or missed payments on your accounts, it can reflect badly on how you manage your money.
3. Pay Off Past-Due Balances
You can improve your credit by paying off past-due balances. Your report will reflect that you are taking care of your obligations and this can help to improve your score. This can also show your potential employer that you are taking steps to improve your credit.
4. Don't Close Any Current Accounts that Have a Good Balance
Credit reporting agencies like Experian and Transunion look at how much debt is owed compared to what's available for use when determining a person's overall level of risk when
borrowing money. This means it doesn't matter if there is no balance on a card as long as there is available credit so make sure to keep those cards open to improve your credit rating.
Get Hired Even with Bad Credit
It is not impossible to get hired even if your credit is in bad shape. There are many available jobs that do not require a credit check and for sure, these jobs are way better than unemployment. Another thing that you can do is gradually improve your credit score to show employers that you are taking steps to be more financially responsible. If you are quite sure that your prospective employer will check your credit history, be proactive, upfront and honest. Getting into financial troubles sometime in the past happens to many people but honesty will always be appreciated and could swing things in your favour when it comes to being hired, even with a bad credit history.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
