Is your spotty credit history keeping you from landing that dream job? Possibly.
A new survey from nonprofit advocacy group Demos found that 1 in 7 people with poor credit weren't hired because of their credit history. One in 10 people who were unemployed were turned down for a job because of information in their credit report, according to the survey released Monday.
The study also found that it's not uncommon for prospective employers to peek at credit files as part of the hiring process. One in 4 unemployed people surveyed reported being asked for permission to pull their credit report during the job application process.
"Employers seem to suggest that a credit report will show how responsible a job candidate is, but there is no real good social science out there supporting that," says Amy Traub, a senior policy analyst at Demos and author of the report, which surveyed 997 low- and middle-income Americans with credit card debt.
Employers are allowed to check credit reports under the Fair Credit Reporting Act as long as they obtain written permission from job applicants. However, eight states -- California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington -- restrict employers' access to job applicants' credit reports.
Employers are looking for red flags when scanning credit files, says John Ulzheimer, president of consumer education at SmartCredit.com. Negative credit items could suggest irresponsible financial habits that may cause distractions, such as collection calls to employees, he says.
"Then there's the issue of the employer getting thrust into your financial life," he says. "For example, if you have a ton of defaulted debt and judgments against you, there's the possibility that a garnishment may be served upon you and your employer."
Job hunters should pull their credit reports from the major credit bureaus -- TransUnion, Experian and Equifax -- so they know what potential employers are seeing, says Traub. (Americans are entitled by law to a free credit report from each bureau once every 12 months.) Correct any errors before embarking on your job search. The Demos survey found that 1 in 8 respondents with poor credit found errors in their credit reports.
Ulzheimer also recommends being forthcoming about any credit blemishes and to provide an honest explanation to prospective employers. Job applicants can also refuse to give permission for a credit check, but that could ultimately take you out of the running, he says.
Aside from credit checks, employers also conduct criminal background checks, employment verification and, depending on the job, drug tests, Ulzheimer says.
"(Credit checks) are probably the least invasive practices when it comes to employment screening," he says.
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