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Will poor credit affect your chances of being hired?

8/10/2022

A credit check can help an employer flag fraud or theft, and it can also help indicate if someone mismanages their money.

Employers running background checks isn't a new concept. It's something that's widely practiced. But more recently, some employers have started including credit reports as part of that background check. For many people, this can be concerning and begs the question– will my credit affect my chances of getting hired?

The answer is, it depends. It depends on what the report looks like, what field you're applying to, and whether you can provide a legitimate reason for any red flags that pop up on the report.

A credit report shows your credit history, any debts, and available credit. A credit score is a three-digit number that is meant to summarize your credit report. An 850 is a perfect score. Anything under 580 is considered very poor. Having a poor credit score can impact whether you can get a loan, qualify for a credit card, and affects the interest rates you're given in financing situations. If your credit isn't exceptional, you're not alone. According to badcredit.org, about 11% of U.S. consumers have credit scores under the 580 threshold. Around 22% of U.S. consumers have scores over 800.

The information on your credit report dictates your credit score. And although your credit score wouldn't be shared with your potential employer (only a modified version of your credit report would be), it can help you assess how it will reflect when this information is presented.

As far as using this in an employment screening, this may sound like a frustrating concept, especially considering that for some people to fix their credit they need a solid job. However, in most cases when this comes up and a credit report is viewed as part of a background check, it's because you're entering the field of finance or one that requires security clearance. A credit check can help an employer flag fraud or theft, and it can also help indicate if someone mismanages their money.

For the average person who may fall somewhere in the middle when it comes to credit, or even someone with poor credit looking for a fresh start and a reliable job, if your employer does require a credit report as part of their screening, so long as you've done nothing questionable or fraudulent and you're not going into a field where you're handling money, you should be able to explain any red flags (if any).

Plus, an employer can only see a modified report. This means that they won't be able to see any information that would go against equal opportunity employment. What they will see is your open lines of credit, any debts, any loans (including auto and student), foreclosures in your past, late and missed payments, and anything with collections within a certain timeframe.

If this is something that concerns you and comes up in the screening process, be sure to look into your rights when it comes to credit checks and employment. For example, you need to be notified and give written consent for an employer to check your credit. Being prepared and communicative can go a long way in the hiring process. 

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