Can You Be Turned Down for a Job Due to Your Credit Rating?

When you apply for a job, you may be asked to provide information permitting a credit check. This is often called an "employment credit check," and it can take place simultaneously as a background check or citizenship verification. You may be dropped from consideration for the position if there is adverse information on your credit report. However, the employer must follow guidelines to take this step.

Background

• An employer is permitted to undertake an "adverse action" based on your credit report. This action is typically to disqualify you from hiring. Your credit report carries information on your history of taking on and repaying debts. An employer, in general, uses this as an indicator of your responsibility. If you have been irresponsible with borrowing, it may be a warning flag to the lender.

Prevention

• If you know you have bad information on your credit check, be proactive to prevent a problem. As mentioned above, the employer is most concerned with whether or not your are responsible. Sometimes, defaulting on debts is not a matter of irresponsibility but a matter of adverse financial problems. If you previously lost your job or suffered an illness and resultantly defaulted on debts, explain the hardship to your potential employer in writing. Submit an explanation along with your application in order to explain how the problem occurred and how it has been corrected.

Notification

• Before a potential employer checks your credit, you will be informed in writing, giving you plenty of time to submit a letter of explanation. You may refuse to allow a credit check, but this can result in your disqualification from the opportunity. If the employer runs your credit check and will be taking adverse action against you, it must submit a copy of your report and a "pre-adverse action disclosure" form to you. Failure to do so is a violation of your rights under the Fair Credit Reporting Act. Afterward, you will receive an "adverse action notice." You may dispute any misinformation on your report. You may also file a complaint with the employer or Federal Trade Commission if you feel the employer did not notify you properly.

Exceptions

• An employer can choose not to hire you based on your credit rating, but there are limitations to this rule. You cannot be discriminated against for a bankruptcy that occurred over 10 years ago. The employer cannot exclude you based on paid tax liens, civil judgments, accounts in collection or any other negative information after seven years. It is important to note none of these exceptions apply if you are under consideration for a job paying in excess of $75,000 per year.

Solution

• If you have been turned down from a job because of your credit check, assure the employer followed legal notification guidelines discussed above. Next, ensure the problem does not occur again. Dispute any negative information on your credit score. If you have liens against you or loans in default, negotiate with your lenders to resolve the debts and remove them from your report. Many lenders will arrange to remove the negative information if you can repay in full. If the lender will not remove the information, consider submitting an explanation of hardship to the credit reporting agency to be attached to your report. This letter can address the circumstances surrounding the debt and the resolution of the debt. Finally, assure positive information, such as debts that have been repaid, is reflected on your credit score. This is particularly true if you have recently turned your credit around.