How Credit Impacts Employment
Whether you’re unemployed or hunting for a new position, your job search can be impacted by your credit report. Knowing that a potential employer may, depending on state law, check credit history can cause great concern for job applicants – and claims of unfairness. After all, a divorce, layoff, or even a medical problem can put many people in financial dire straits – and these issues can skew the real picture of a person’s financial prowess.
Unlucky circumstances aside, “your personal credit report gives employers an indication of the quality of your work,” says Gregory Meyer, community relations manager for Meriwest Credit Union in San Jose, Calif. “If you make payments on time, pay off debt in a timely fashion, and avoid judgments and tax liens, you may be the right person for the job. If you ignore your creditors, allow bills to go into collection, and are consistently late making payments, you may find yourself still in the unemployment line.”
To employers, your financial past may say something about your responsibility level, and can green-light or kill your job prospects. Here are five reasons why…
1. Bad Credit? Forget About a Job in Finance
If you’re a trained numbers-cruncher looking for a job in the financial industry, a high level of financial finesse is expected on your part. “Any job relating to banking or finance will almost always require a credit report on the applicant,” says financial expert Ellie Kay, author of The Sixty Minute Money Workout. “If your score is low, you’re not likely to get the job. The reasoning: If she can’t handle her own money, why do we want to trust her with the company’s money?”
2. Employers Want to Avoid Crisis Management
It’s easy to claim that whatever is happening at home will not negatively affect your job performance, but any major personal issue can get in the way of productivity. Stress or preoccupation with a financial crisis will invariably affect work output. “The employee may miss days, lack concentration, become less productive. It’s far easier for the employer to hire the person with a decent credit report,” explains Kay. When factors beyond your control affect your credit history, note it. “You may have a 100-word statement placed on your credit report that explains why, for a period of time, payments were consistently late or balances grew quickly,” Meyers explains. “This speaks volumes to an employer.”
3. Bubble Applicants May Lose Out on Job Opportunities
If you’re neck and neck with another candidate, potential employers may use your credit report as a way to break the tie. “Sometimes employers are hiring mid-level managers with the purpose of grooming them for higher-level positions. While your current ‘average’ credit history may be good enough for an entry-level position, it might not measure up to the long-term plans that an employer has in mind,” says Kay. “The guy with the above-average credit report will get the job.”
4. Employers Want to Invest in Longevity
Employers want to hire employees who evidence that they are in it for the long haul. “When a prospective employee shows a questionable ability to handle their own money matters, especially if there is a history of bankruptcy or up-and-down debt loads, they present a long-term risk,” explains Kay. “According to the Equal Employment Opportunity Commission, bankruptcies on a credit history are not supposed to influence whether an individual is hired or not. But who knows what subjective influence derogatory indicators may have on the hiring process.”
5. The Hamster Wheel Effect Can Take You Down
“When you’re unemployed, it’s harder to keep up with the bills. There may also be more consumer debt because the unemployed sometimes have to charge even basic necessities to keep food on the table,” Kay says. When you’re denied a job due to spotty credit history, you can remain unemployed that much longer – adding to the hamster wheel effect. While this may feel like a case of “you can’t get credit unless you have credit,” it should actually be great incentive to solve your financial issues on the double. Suggests Kay, “If possible, downsize your home, become a one-car family, take in a renter, or make other drastic moves to build the credit history back up so you can get off the wheel and back into the work force.”
The bottom line is that employers want to have confidence in their employees, and an individual’s personal record with money can ultimately help or harm their chances of landing the job they want. “An employer will likely not hire an employee into a position of trust should that person have a poor credit report. Employers can’t take the chance,” says Meyer.
About the Author
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Lander holds a Bachelor of Arts in political science from Columbia University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.