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Liz Pulliam Weston

The Basics

How bad credit can cost you a job

Unemployment can make it hard to pay bills, but failing to do so can damage your job prospects. Here's how to handle a potential employer's request to run a credit check.

By Liz Pulliam Weston
MSN Money

Job hunters, how's your credit?

Many Americans these days are discovering the Catch-22 of unemployment. And that is: You might fall behind on your bills because you've lost your job, and you might not be able to land a new job because you've fallen behind on your bills.

A fair chunk of employers want to examine your credit history before offering you a position or a promotion. Blotches there -- repossessions, collections, high credit card balances -- could cost you the job you want. For example, applicants for Transportation Security Administration airport screener jobs are rejected if they have more than $5,000 in overdue debt.

Recent statistics are scarce, but when the Society for Human Resource Management polled its members in 2006, 43% of their companies ran credit checks on some or all potential hires. That was up from 25% in 1998.

Plenty of people don't think that's fair, including Rep. Steve Cohen, D-Tenn., and 26 of his congressional colleagues, who on July 9 introduced H.R. 3149, which would prohibit the use of credit information in most employment decisions. Two states, Hawaii and Washington, already do so.

Bad credit still beats a criminal past

"There's so much financial turmoil right now. People have lost jobs, homes, income," said consumer advocate Ruth Susswein, the deputy director for national priorities for Consumer Action. "Some people who have had good credit may no longer, and when they most need a job, it seems unfair to put that at risk for something that may have nothing to do with the job they're after."

It's too early to predict whether the bill has a shot at becoming law, but even if it did, there would be some exceptions, including:

  • Jobs involving national security or Federal Deposit Insurance Corp. clearance.

  • Employment with a state or local agency.

  • Supervisory, managerial, professional or executive positions at financial institutions.

Some employment experts say concern about credit checks is overblown. For one thing, they say, companies typically are far more interested in other kinds of background checks, including identity verification and criminal histories. (For more information on background screening, see "Secrets a background check won't uncover.")

Job applicants are much more likely to lose jobs because they have a recent criminal history or they lied on an application about their identity, experience or education, said William Greenblatt, the CEO of Sterling Infosystems, a New York City background-checking firm.

Employers are more likely to use credit reports as a way to verify employment history and Social Security numbers, Greenblatt said. Lenders often verify employment when you apply for a loan or credit card, so a credit report is seen as a good way to double-check the employers listed on a job seeker's application.

Will you work with money?

But many companies do use credit histories as a way to weed through job candidates. In the private sector, the people most likely to have their credit reviewed are those who will deal with cash or valuables, or who are financial executives, said Greenblatt, a labor attorney with more than 30 years' experience in employee testing and screening.

"Bank tellers, CFOs (chief financial officers), controllers, people who work for brokerage institutions, financial institutions," he said. "Jewelry manufacturers do credit checks. . . . When you're dealing with diamonds, they're easily concealed (and stolen)."

Video on MSN Money

Credit clean-up © CNBC
Credit clean-up
A couple get advice from CNBC's Carmen Wong Ulrich and credit guru John Ulzheimer on how to boost their credit scores.

The rationale is that people with big debts or other credit problems may be more likely to steal or commit fraud. Even if a job doesn't involve money, some employers are convinced that people who manage their credit well are better workers than those who don't.

"There's a perceived correlation between a high debt load and the possibility of embezzlement, theft or malfeasance," said employment attorney Manesh K. Rath, a partner at Keller and Heckman in Washington, D.C., who advises companies about their hiring practices. "This is a widely held belief in the employer community."

But what's also driving the push to check credit is fear of lawsuits, Rath said, especially in businesses where employees have access to customers' money or possessions, including the banking, property management, hotel and home health care industries.

If a visiting health care worker steals something from a client's home, for example, that client isn't likely to sue the offender in civil court. The client might instead sue the employer, which is perceived as having deeper pockets and responsibility for hiring the thief.

"The employer will have a tough time defending itself," Rath said, "if it didn't take the simple measure of doing a background check."

Continued: Clean up or clear out

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Monday, August 17, 2009 6:13:59 AM

Someone that has trouble paying bills on time, following a budget, and controlling their spending habits certainly carries baggage to their job.  Such behavior will end up hurting their employer.

 

Why deny someone that is giving gainful employment those facts?  Otherwise you should not hold companies responsible for the behavior of their employees!!!

Monday, August 17, 2009 6:24:02 AM
what do those items have to do with job performance?
Monday, August 17, 2009 6:44:08 AM
I can certainly see where an employer would want to be able to use debt management as one tool for deciding compatibility.  Accountability should be a key factor in job placement.  Any and all tools should be available for assessing the candidate....and , if that seems to be a problem, then clean up your mess>  A credit card is a short term loan....pay it !!
Monday, August 17, 2009 6:51:07 AM
Sure Tom you miss the point here. Can't pay if noone gives you a job
Monday, August 17, 2009 7:14:07 AM

This practice is criminal and discriminatory! Period! There is no basis (statistical or otherwise) that shows a correlation between a low FICO score and bad job performance or a tendency to commit a crime at the workplace, which is what they are using this for. There is absolutely no data to support this at all!

 

Also, as far as, using that to obtain past work history is ridiculous seeing how all 3 of my reports don't have my job of 8 years even listed.

 

I guess the days of a person actually calling a former employer to discuss their performance and a criminal background check is too much work or effort.

 

The use of a credit history is to me even worse the discrimination based on race!

 

Thank god I am white and educated because if your not and have bad credit you wont get any good paying job with this joke of a system being instituted by employers.

Monday, August 17, 2009 7:15:45 AM
From what I understand is that it is the cheapest way to do something of a background check, so once again its about $$$
Monday, August 17, 2009 7:19:43 AM

Yes it is totally wrong to use your credit against you when your getting a job, It has absolutely nothing to do with your job, I have had trouble times do to lay offs and some payments were late but it was not because of my own fault, it was the lay off that caused the effect. And no matter what kind of debt I have been in it has never and I have never came to the resource of stealing. I sincerely would make a state wide ordeal out of it(Federal Court) if it came down to where creditors was taking me to court and saying I wasn't paying, then I would simply tell the judge I have no job because the laws allow companies to use my credit against me to prevent me from getting a job. So In return folks its going to hurt the companies and creditors as well. And I will send a letter to senator carl levin express my concerns on this matter. It should be stopped asap. So people flood your senators with letters.  

 

This is the same as the car insurance companies using your credit to cover you for car insurance, the laws in most states say you have to have it, so your in a losing battle with the insurance company because their going to charge you the highest rate. Their all a bunch of money ****. They want you to pay them and then the government allows your credit to be used against you getting a job. TOTALLY IDIOTIC

Monday, August 17, 2009 7:34:41 AM
LOL, how pathetic, the country leaders destroy everyone`s credit by creating a economical depression where millions lose their jobs and homes and the same crooks allow companies and employment agencies to check on peoples' credit for potential employment. What have we become? how can this crap be allowed? I heard before that there is a number of the devil that will change things for people who have one and for those who don`t have one, guess what? it is the credit score, a good number gives life and if you have a bad one, you are dead in the water because nobody gives a flying F... about it. So much for being honest, paying the bills on time. This whole credit score thing is a scam, and has always been, wake up people, don`t use banks, don`t buy anything, boycott the system or things will never change. 
Monday, August 17, 2009 7:55:29 AM
In a nutshell, as the author explained, if you have mitigating circumstances, you should inform the potential employer. Financial distress causes serious pressure at home, which inevitably trickles into the workplace. Higher absenteeism occurs with people that are having marital distress, which is often a result of financial issues. Also, having to leave early to pay a bill that can't wait any longer occurs frequently. What about the person that is forced to take two jobs to pay collections agencies and stay out of court? Do you really think that someone who is constantly exhausted is working up to his or her potential? There are arguments to be made on both sides of this issue.
#10
Monday, August 17, 2009 9:41:30 AM

Like people, companies have its up and down. Using credit history to judge is wrong. Many responsible Americans have only one or 2 credit cards. Credit Score is a scam and design to lure people buy, buy, and spend.  

By standard, most of government employees have good credits. On the other hands, their performance is lousy and worst than anything else.

 

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