Can Bad Credit Crush Job Applicants?

AMA3-26-14You’ve got the qualifications. You’re dressed for the interview and your resume is state of the art. But in spite of all this, the state of your credit could derail your hopes for that dream job. Increasingly, employers are turning to credit checks to make employment decisions. But is it legal to use credit reporting as a hiring tool?

Many factors play into a company’s hiring decisions, some of them overt, others so subtle that even a hiring manager may not be able to articulate what makes one candidate “feel” like a better fit than another. But using certain kinds of information to weed out undesirable candidates is prohibited by law: questions about sexual orientation and a candidate’s plans for motherhood are prime examples.

Now, the question of how far a potential employer can snoop in order to vet potential employees has become more complicated thanks to

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the easy availability of information, sometimes compromising, on the Internet. That includes credit information, and the law isn’t clear on how much investigating is too much.

Like any other potential creditor, an employer can run a credit check and learn things like whether an applicant has ever defaulted on loans or chronic patterns of late payments. They can also find out how much credit a potential employee has and how they use it, as well as what purchases they’re paying off. All these things can provide insights into an individual’s lifestyle and sense of responsibility.

It’s legal to do this under federal law. Credit companies such as Experian offer modified versions of their full credit reports to employers using them for screening processes. And whjie the law also states that it’s not legal to use any information that might be discriminatory in an employment decision, it’s not always easy to determine where those lines are drawn. And since those kinds of inquiries remain confidential, a job applicant may not actually know what credit information is playing a role in hiring decisions.

Credit and money management experts acknowledge that using credit reporting in hiring may be legal, but it isn’t always a fair reflection of an individual’s competence, reliability or sense of responsibility. Still, in today’s employment world, it’s almost a given that credit cheeks will be run as part of an employment application – and applicants need to be proactive and protect themselves.

The answer? Make cleaning up credit a part of the application process. Take a look at your own report and resolve any outstanding issues before launching the job search if possible. Contact creditors and work out ways to resolve outstanding accounts. No one but the employer may ever know what kind of information affects a job application, or how it may be used. But as Jason Hartman says it’s vital to take control of your credit – before it takes control of you. (Top image:Flickr/PhilipTaylor)

Read more from The American Monetary Association:

International Students Boost the Economy

Social Security Numbers Define Our Identities

The American Monetary Association Team

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