How Bad Credit Can Affect Job Prospects

We all know that our personal credit history affects our ability to secure a home loan or open an account at a department store. But most Americans are unaware that bad credit could cost them a job.

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Many employers use credit history as a tool in their pre-employment screening as just one measure of judgment and character. If you can't manage your financial obligations, they wonder if it's a sign of irresponsibility. If your monthly debt payment is higher than your salary, some employers worry that it may distract from your performance.


Critics of this practice say it's unfair for personal credit history to be used when judging professional qualifications. They say there's no link between poor credit and job performance. Many of these people have hit rough patches, and now they're caught in a vicious cycle: To pay down their debt, they need a job, but they can't get hired because of their debt.

The majority of employers today use some form of background check as part of their due diligence — not because they're interested in prying or playing gotcha. By the time they move forward with a background check, they've decided they want you. So whether it's verifying your education and work history, a drug test, checking your criminal history or even your credit, they're genuinely hoping that everything checks out.

When it comes to credit history — specifically the amount of debt and the number of delinquencies and negative accounts — some positions will have firm standards in black and white. If your credit is weak, you can expect a red flag, which might include losing the offer , if your role requires you to be involved in finances — a cashier, payroll manager, financial planner or senior financial executive, for example.

The same applies if you're handling expensive jewelry or other small valuables, if you have access to trade secrets or if you're a key holder, someone who opens and closes a store and has access to cash and merchandise. Almost always in those cases, you can expect a credit check. But it's by no means limited solely to those areas; employers use their own discretion when deciding which positions to screen.

Beyond that, if you're in a position that involves high security or access to cash and valuables, you may be subject to recurring background checks while on the job. Ask your employer directly about its policies.

Read the fine print. Under federal law, prospective employees must give permission for employers to conduct background checks, including credit checks, so none of this happens behind our backs.

Yet some 80 percent of Americans, according to a Visa survey, don't realize that credit history can be used in pre-employment screening. Whenever you sign an employment application, read the fine print. Most of the time, you're signing a consent and disclosure clause that grants your permission to the employer and its designated third party vendor(s) to conduct a background check. Be aware of what exactly you're agreeing to upfront.

Bad credit, now what? If you have poor credit, it doesn't automatically mean you're unemployable. You should focus on three steps so you don't lose out on positions.

Check your credit report. Even if you're not actively job searching, everyone should know what's in their credit report. Under federal law, you have the right to receive a free copy of your credit report once every 12 months from each of the three nationwide consumer reporting companies. (Visit to access those reports.) Don't bury your head; if you have problems with your credit or you find mistakes on the report, address them immediately with creditors and the reporting company. This will come in very handy should you find yourself looking for work.

Ask the employer's policy. Then when it comes to job searching, avoid voluntarily discussing credit history during the interview process. There's no need to knock yourself out of the running prematurely. When you receive an offer that's contingent on a background check, ask directly, "I'm thrilled at the prospect of working here. What is your policy on background checks? I'd like to know what specific screenings you use and the general timeframe for that process." At this point, they've said they want you, so you're in a good position to ask such a question with relative ease. Most employers will gladly walk you through their process.

Speak up with confidence. If an employer says the background screening includes a credit check — and you've seen the negative activity on your credit report — then you should consider speaking up. You can say, "I'd like to tell you what in advance you're likely to find on my personal credit report. Please allow me the opportunity to explain it, too." It's important to have a solid rationale. Maybe you hit a challenge because of an unexpected layoff, a divorce, a medical necessity, or a problem with your mortgage. Maybe there are mistakes on your report that you're working to fix.

Talking about personal credit can be embarrassing and difficult for anyone — you're not alone — so at this moment it's essential to have a clear, confident explanation that you've rehearsed. You don't want to babble or look like a deer in the headlights. Speaking up at the right moment can make or break the job opportunity.

Additional resources: ChoicePoint ( and Sterling Testing Systems ( are two of the services used frequently by employers to conduct background checks. Visit their sites to educate yourself on the pre-employment screening process used by employers and for information on facts and services available to individuals.

Tory Johnson is the workplace contributor on ABC's "Good Morning America," and the CEO of Women For Hire. Connect with her at