"I can't get a job because I have bad credit, and I can't improve my credit because I can't get a job!"
It feels like a classic Catch-22. Fortunately, the reality is not quite that harsh. In most cases, an imperfect credit record will not automatically prevent you from getting the job or promotion you want. Here are answers to some typical questions regarding the good job seeker-bad credit conundrum:
Is it Legal for an Employer to Check Your Credit?
- Yes, but they have to inform you and get your signed permission if they're hiring an outside screener. (But no permission is required if they're doing their own fact-checking.)
Why Do Employers Check Your Credit?
- They presume a person with money troubles will be more inclined to steal in a job that involves direct access to cash or valuables.
- For people working in financial industries (banking, accounting, investments, etc.), having a track record of fiscal irresponsibility calls into question their financial expertise and suitability for the job.
- Government or other sensitive jobs often mandate full background checks (including credit reports) for security reasons. An employee who’s deeply in debt is more likely (statistically speaking) to accept bribes, sell secrets, or take part in other illegal income-generating schemes.
- Credit checking can sometimes be another way to verify facts, dates, and numbers on your resume (e.g., discrepancies between education dates and student loan dates).
If Your Credit's Not Perfect, Should You Bother to Apply?
- First, it's important to realize that only about 35% of companies actually pull credit reports on current and prospective employees. In other words, almost two-thirds don't.
- If you have "ordinary" glitches in your history, such as a late credit card payment or two, it's not likely to be a deal breaker.
- If you've defaulted on loans, faced repossessions or foreclosures, bounced a lot of checks, and have collection agencies hounding you, your employment choices will be more limited.
- In general, you have a clean slate once all your credit troubles are at least seven years in the past. Paid tax liens, accounts placed for collection, and any other negative information (except criminal convictions) are removed from the report after seven years.
What Can You Do About It?
- First, get a free copy of your credit reports, so you know what employers are going to find. Contact the reporting agency and get any errors fixed, pronto!
- Then, do some research of your own about how to fix bad credit — and beware of scams, because plenty of shady people are out to prey on you when you're desperate.
- If your credit problems are the result of factors beyond your control (such as medical bills) be up-front about it with prospective employers (but ONLY when you're being offered a job and it’s probable they're going to check your credit).
- And if your problems are caused by, ahem, living beyond your means, check out this surefire advice from SNL: Don't Buy Stuff You Can't Afford. Ouch!
For full information on this topic, including the legal intricacies of the Fair Credit Reporting Act (FCRA), visit the Federal Trade Commission web site.
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