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1 in 7 denied job due to credit

By Janna Herron · Bankrate.com
Tuesday, March 5, 2013
Posted: 4 pm ET

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.

Follow me on Twitter: @JannaHerron

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15 Comments
StevenWoodrow
February 12, 2014 at 6:47 pm

If you've been denied a job based on credit you may be entitled to damages. Call an attorney without delay: (303) 357.4878

-Steven Woodrow

this message may be construed as attorney advertising.

scott
January 10, 2014 at 10:59 am

A credit score reflects a person's commitment. One makes a promise to repay a creditor. If you can't stay true to your word and do what you promised, how can an employer trust you to do your job? You guys who complained are all bust outs.

Vicki
March 18, 2013 at 12:13 am

I beleive the issue at the present time is the unemployment rate it is basically an employers market at the moment. They seem to delve a lot further into ones history than seems right. I do not agree with pulling a credit report for a job determination unless it is a requirement of the job you seek, but even there, bad credit occurs for several reasons, it is not just because you are irresponsible. Trust me Iknow, I have medical debt coming out of my ears which has rolled over into all facets of my life. Since when does your credit score define who you are?

RecessionDecision2020
March 13, 2013 at 4:10 pm

I am in the process of being considered for a position, (I think)and I am very worried my credit score will be problematic for me.

I'm not saying my credit history shouldn't be a factor in their decision but if it is, it puts me right back into the hole!

You need a job to pay bills and if you don't have a job,bills don't get paid.

BTW, my credit score was in the upper 700s pre recession, not perfect but not terrible either.
Being laid off for a longer period of time than I intended meant I could not repay a creditor a line of credit and my score tanked.

Floorboss
March 13, 2013 at 2:11 pm

I think its unlawful and illegal for a company to check your credit score and based upon that making a decision to hire you or not. Given me as a example I was hurt in my last job due to unsafe work enviroment and jb was threatened if I did not do my job. I got hurt and had to declare Bankruptsy. Now no company will hire me due to that even though I am always on time and did my job. I think there should be a law to protect the applicants from credit scores. I do though belive in more criminal backgound checks

sidney
March 13, 2013 at 12:55 pm

its no wonder crime is at aall time high

sidney
March 13, 2013 at 12:53 pm

dam what apples got to do with oragans. ur there to get ajob not to get deined a job because of ur spending habits

Duggie
March 06, 2013 at 5:53 pm

Isn't that the same as not feeding someone because they are hungry?