No Supporting Research

“At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud,” Eric Rosenberg, a lobbyist for TransUnion, said in testimony before Oregon state legislators in January.

But only people who have studied credit bureaus are aware of such findings. For most employers, a credit report is viewed as an impartial, almost scientific fact. Which means arguing a blemished credit report with a prospective employer is unlikely to win much sympathy.

“Your credit report represents the balance sheet of your financial reputation,” says Adam K. Levin, chairman of Credit.com. “It is perceived to be an unbiased report of your conduct in the marketplace.”

Meanwhile, employers argue that for some important jobs, especially those in which workers handle money, a credit check is an important tool in the hiring process. They also argue that sufficient guidelines are already in place to prevent the misuse of credit reports. Federal rules require employers to notify applicants before checking their credit, and to tell applicants if a poor credit report influenced the decision to hire someone else.

“Credit check results are one important component of the hiring decision but are not typically the overriding factor in the consideration of a job candidate,” Walters testified. Besides, “employers regularly go beyond the requirements of current law and allow candidates to explain their credit history, a consideration that frequently benefits both the employee and employer.”

Communicate with Prospective Employers

Credit experts agree that since employers may check applicants’ credit reports, applicants should be proactive. That means doing everything they can to make sure their reports contain no errors. If everything is correct but the score remains low, accepting a credit check as an opportunity for two-way communication in the application process may help applicants get ahead of the bad news.

“You need to nurture, build, manage and protect your credit profile,” Levin says. “If it has errors, you need to correct them. If the report is negative but true, you need to handle it intelligently by talking to the employer beforehand about what caused the problems and what you’re doing to fix them.”

Beer admits that she should have managed her credit better after losing her job. But now she sees no way to fix the problem until she can land a new job with an employer who looks to see the person behind the credit report.

“I did have mistakes,” Beer says. After she got laid off, “it didn’t take very long for my credit to go downhill.  But bad credit shouldn’t impede on the things people need to live.”

NOTE: In the original version of this story Ed Mierzwinski of U.S. PIRG was quoted as saying that employers frequently check credit scores of job applicant. That is incorrect. Employers are not permitted to check credit scores. They are, however, permitted to check credit reports, and many do. Mr. Mierzwinski says he believes he did say “reports,” not scores.

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Tagged as: bad credit, credit reports, employment

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Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Reach Chris via email at chris@credit.com.