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Why Cleaning Up Your Credit Can Help You Land a Job

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If you’re climbing the ladder to your dream job, you’ve thought about every detail: your resume layout, your interview techniques, your clothing and even your haircut. But have you checked your credit history lately? You may not be aware of it, but your credit history has more to do with your career potential than you think.

The Fair Credit Reporting Act—the law that governs credit reporting practices in the United States—puts all sorts of restrictions on who can view your credit report and what that information can be used for. And although the practice is somewhat controversial, the law makes provisions for employers to check credit reports of potential employees.

In fact, this practice isn’t just legal; it’s actually fairly common. A 2010 survey from the Society for Human Resource Management showed that 60 percent of employers use credit reports as part of their pre-employment screenings.

So while you’re picking out your outfit for your next interview, you may want to check your credit report and get to work organizing your financial life.

Why employers use credit reports

Credit reports are designed to tell potential lenders whether an individual is likely to default on a loan in the next 24 months. So why do employers, who aren’t lending you money, use credit reports as part of pre-employment screening?

Employers who use credit histories do so because they assume financially responsible individuals are also likely to be responsible on the job. (Click to Tweet!) If you never seem to pay bills on time, employers may be skeptical that you can meet deadlines or regularly get to work on time.

Also, employers may use credit reports to screen for financial difficulties in a potential employee’s life. Whether or not it’s true, some companies assume employees who struggle financially—like those who have recently been through a bankruptcy or who have a high debt load—are likely to embezzle or steal merchandise.

Why this practice is controversial

Since no major studies link good credit to good employee behavior—or bad credit to bad employee behavior—employers’ use of credit checks for pre-employment screening is surrounded with controversy.

This is especially true in a job market saturated with individuals who have been dealing with long-term unemployment. These individuals are likely to have unpaid bills, high medical bills and other credit report dings.

Because of this, several states (including California, Connecticut, Illinois, Hawaii, Maryland, Oregon, Vermont and Washington) have restricted the use of credit reports in the hiring process even beyond the limits placed by the Fair Credit Reporting Act.

Still, many employers do continue to use credit reports as part of the hiring process, which is reason enough to pay attention to yours.

What to know about your credit report

So what do you need to know about your credit report’s effect on your potential career? These four facts:

1. Employers need your permission to pull your credit report. You’ll know if a potential employer is going to look at your credit report because you’ll need to sign a release to grant them access.

2. The report they use is different from the report a lender would see. This credit report shows limited information to potential employers, and it doesn’t assign your credit history a numerical credit score.

3. Pulling the report has no effect on your credit score. If a lender pulls your credit report when you apply for credit, you’ll notice a small ding in your score because of the inquiry. A credit inquiry from a potential employer, on the other hand, won’t affect your score at all.

4. Your credit is just one part of your reputation. A terrible credit history could negatively affect your chances of getting hired—especially in a close race with another great candidate who has a great credit history. But it’s just one piece of your overall reputation, so you should look at managing your credit history just like you would managing your reputation online before applying for a job.

Your chances of advancing in your career aren’t completely shot if you’ve made credit mistakes. But you should always be aware of what hiring managers are looking for. And the fact is that many hiring managers do factor in credit history.

So keep your credit report as blemish-free as possible, and you’ll only boost your chances of getting hired.

Abby Hayes is a freelance blogger and copywriter who writes about personal finances for Dough Roller. She loves detailed budgets, dark chocolate and fat Victorian novels.

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