People often worry about their credit history when it comes to applying for a new credit card, a mortgage or a car loan. If you have poor credit, should you also be concerned about finding work? Can you be denied a job due to bad credit?
Let’s examine the facts.
[top_pitch]
What is bad credit anyway?
Bad credit is basically a negative assessment of your finances based on your history of borrowing. Bad credit implies that you have a bad track record with lenders. This is most likely because you have a pattern of not paying your bills on time or defaulting on your loans.
Is it legal for employers to check my credit report?
Law and finance firms are legally required to perform credit checks on potential employees. However, other kinds of employers can also conduct credit checks on you before they hire you. But they must ask for your permission before they do so.
In many cases, a credit check will be performed by a company if the role you are applying for involves dealing with large amounts of cash.
Why might employers want to check my report?
There are many reasons an employer might want to check your report. For example, they might want to ensure that:
- You are who you say you are.
- You have a good track record of managing money.
- It’s not too much of a risk to let your manage money.
- Your financial behaviour will not affect your work performance.
[middle_pitch]
Can an employer deny me a job due to bad credit?
Yes. According to credit reference agency Experian, if your prospective employer feels that your current financial situation could impact your ability to perform well in the role, or if your credit history shows poor financial planning, they may decide not to hire you.
Generally speaking, however, employers are more likely to be concerned about serious ‘red flags’ in your credit history, like bankruptcy rather than the odd missed payment.
In any case, employers only get access to your ‘public’ credit report. This contains your electoral roll information and any major red flags such as bankruptcies, individual voluntary arrangements and county court judgments.
They will not have access to your detailed credit repayments or your credit score.
How can I keep my credit history from affecting my ability to get a job?
If a prospective employer runs a credit check on you, ultimately you have no control over what they do with the information, including denying you a job due to bad credit.
The best thing you can do to minimise the impact of your credit on your chances of getting a job is to review your credit report beforehand.
You have the right to one free credit report per year from each of the three credit agencies (Experian, TransUnion and Equifax). Before you apply for a job or attend an interview, request your report and review it for any errors so that you can have them corrected ahead of time.
Even if there are no errors, knowing what is on your credit report puts you in a good position to answer any questions that may arise during the hiring process.
Indeed, if there’s something in your report that employers might consider a ‘red flag’, don’t panic. Instead, begin preparing an explanation to give to them. If it was, for example, caused by financial hardship beyond your control, the employer may take this into account.
Alternatively, you can contact a credit reference agency and request that a notice of correction be added to your report. This is a brief note of up to 200 words in length that explains circumstances that a lender might otherwise question.
