Credit can be an important factor when it comes to unlocking life opportunities and making important financial decisions. It can even have an impact on your ability to get employed, so what can happen when you're looking for a job when your credit isn't where you want it?
While you can still get a job even if your credit is poor, you may want to consider some factors that we’ll explore in this article, such as:
- Why employers look at credit reports
- Background checks and your rights
- Checking your credit report
- Building good credit
Why do employers look at credit reports?
When you apply for a job, you’ve probably been asked to have a background check run. These are quite common, as employers may want to assess your records, confirm your identification and more. It’s also possible that your potential employer may request a background credit check. This is slightly different. An employer may want to do this to help them understand your financial behaviors and ability to manage your funds responsibly.
Similar to a regular background check, a credit report provides helpful information to increase an employer's understanding about you and your financial habits. This can be especially important for jobs related to banking and finance.
Background checks and employees’ rights
According to the Fair Credit Reporting Act (FCRA), the employer can’t look at your credit report unless you give written permission. When you’re applying for jobs, be sure to read over your employer's paperwork in detail in case you are signing off permissions for them to run a background credit check.
If you do give permission, this grants the employer access to your credit report, but not your credit score. Additionally, you may want to consider the following:
- According to FCRA, the employer must notify you prior to checking your credit and must get your permission beforehand — it must be clearly stated in the paperwork.
- There may be a “pre-adverse action notice” with a copy of your credit report, which informs you that the employer may reject your application due to poor credit prior to making their final decision.
- The employer must give you a period of time (a few days) to be able to explain/justify any remarks on your report and allow you to address mistakes that might be on there.
Keep in mind that it is possible for your potential employer to deny you a job due to poor credit. This may be due to the fact that poor credit could pose a risk for fraudulent activities. Especially if the job involves finances and reporting numbers, a good credit report could imply a certain level of financial responsibility that you have. A bad credit report could indicate that you are not as cautious as an employer would want their employee to be.
You may want to consider the state in which your employer is based in, as this may impact your employment as well. According to Experian™, these states are not allowed to make hiring decisions based solely on your credit:
- California
- Colorado
- Connecticut
- Delaware (restriction only applies to public employers)
- Hawaii
- Illinois
- Maryland
- Nevada
- Oregon
- Vermont
- Washington
Note: Background credit checks are prohibited in New York City and Chicago.
How to check your credit report
Now that you know the importance of being in good standing with your credit prior to applying for a job, you may be wondering — how can I check my credit report?
You can receive your credit report and credit score when you enroll in Chase Credit Journey®, a free online platform that provides educational resources to help improve your credit. You can also receive an annual credit report from the three main credit bureaus — Experian, TransUnion® and Equifax®. Check with your lender as well — they may offer you a VantageScore® or FICO® score and credit report on a regular basis.
Ways to decrease the impact of bad credit when applying for a job
To help decrease any impact your credit might have on getting a job, be sure to address any mistakes or red flags on your credit report prior to applying. You can request the credit bureaus to remove incorrect information from your report beforehand by contacting the bureaus directly. After the inaccuracies are removed, it’s possible that you will have an updated report, which can improve your chances of getting approved for the job. However, these inaccuracies are rare. It’s important to build and maintain good credit habits, as this healthy consistency over time can provide more opportunities when it comes to jobs, approvals for loans and more.
Ways to build good credit
Building good credit takes time, patience and diligence, but with the right tools and insights you can achieve financial wellness and improve your credit score. Building good credit comes down to simple but effective steps, such as making your payments on time and avoiding late payments and other derogatory remarks.
When you use the Credit Journey® credit improvement feature, you’ll receive a free, personalized action plan provided by Experian. This plan gives you actionable steps that you can take now to help improve your credit score over time and build a stronger foundation for your credit history.
In summary
It’s easy to forget about your credit score, but don’t wait to improve it until a major life event — such as being declined for a job due to your credit. Checking in on your credit score and implementing healthy financial habits can go a long way when it comes to solidifying your chances of getting that job, loan or investment opportunity.
