Job searching can be difficult, and one of the worst feelings is when your application is rejected. One of the most stressful situations that many people have found themselves in, is being rejected by a potential employer due to bad credit. It is important to understand when, and in which states bad credit can affect your employability, and what you can do if you are denied employment based on your credit report.
Can Prospective Employers Permitted To Deny You A Job Based On A Credit Report?
In the majority of states, employers can deny you employment if you have bad credit. Employers must get your written consent before they run a credit check as part of the hiring process. It is a good idea to check your credit report to ensure that there are no errors apparent. Although an employer can deny your job application based on your credit report, the presence of certain negative items on your credit report may not hurt your chances for all jobs.
Employers may be able to legally deny you employment based on the results of a credit check. This depends on where you live, the employer, and the nature of the job position.
Federal
The federal government isn't generally permitted to deny employment based on the results of a credit check under federal law. However, certain jobs may require security checks. Therefore, it is imperative that you understand the requirements before applying.
Private
Each state has its own laws addressing the use of credit information for employment purposes, in the private sector. A number of major states, and big cities have legislation which protects the applicant from having their credit reports used against them with regards to employment opportunities. Note that credit scores aren't usually included in background checks, but a detailed credit history from the past several years may be included.
What To Do If You Are Denied Employment Due To Credit Report Errors?
Employers who do credit checks, do so in order to establish whether an applicant will be a reliable employee based on positive or negative data that shows on a credit report. Red flags include:
- Outstanding judgements,
- Tax liens,
- Unpaid collections,
- Charge-offs,
- Bankruptcy, and
- High debt-to-credit ratio.
After this period of time, the employer will send through a “Post-Adverse Action Notice”. This document will provide additional information of your rights, contact information for the company they pulled the report from, and a summary of your right to dispute the accuracy of the information found in the report, and your right to obtain an additional copy of the report used by the employer within 60 days.
What You Can Do If Your Credit Score Is Preventing You Getting Hired?
- Pay your bills on time, every time.
- Decrease your debt-to-credit ratios. This is ratio looks at your credit card balances and compares it to your credit limits - Stick to utilizing no more than 30% of your limits.
- Only apply for credit that you need, not to receive a discount off your purchase.
- Monitor your reports often. A staggering percentage of credit reports contain errors; make sure they are rectified as soon as possible!
Bottom Line
Remember to check your credit report regularly to ensure that all of the data is correct, and that there is nothing damaging in it. Remember that just as employers in specific states have the right to obtain your credit report with consent, you have the right to dispute being rejected for employment once you have received a “ Pre-Adverse Notice” from the potential employer.
