Your Bad Credit May Keep You From Getting a Job

With 16M unemployed and only a few bright spots in the job market, landing a new job is tough.  In fact, it’s getting to be a Herculean feat.  There simply are not enough jobs available and in the right markets to get everyone who wants to work back to work.

Making matters worse is the fact that, according to a survey by Society for Human Resources Management (SHRM), 60% of all employers said they run credit checks on at least some job applicants.  That’s up from 42% in 2006 (pre-recession).  Employers use credit checks to measure integrity and responsibility in potential hires.  The thinking goes, “if you don’t pay your bills or honor your obligations, you may steal from me or be untrustworthy.”

The argument was persuasive enough for states like California to drop veto legislation that would have protected job applicants from credit checks that cost them job opportunities.  Employers argued that credit checks were key tools in candidate selection and that they helped reduce fraud-related financial losses (There’s no research to support this stance).

Lawmakers in other states disagree.  They believe credit checks are unnecessary in most cases and serve only to keep people trapped in debt.  Lawmakers in at least 16 states have proposed outlawing credit checks in hiring selection, except in cases where the candidate’s credit history is relevant to the job for which they are applying, i.e. bankers, cashiers, casino workers and other cash handlers.

Thus far, only Hawaii and Washington have laws against credit checks and no national bill has made it out of committee.

What To Do Now

If you currently live in a state that allows credit checks during the hiring process (and you probably do), you might want to pull a copy of your credit report to ensure there are no surprises.  You should also try to clean it up if you can, and if not, consider explaining your situation to a potential employer prior to the credit check.  Most employers consider debt related to medical bills and student loans benign; credit card debt, collections, judgments, liens and late mortgage payments are considered red flags.


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