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Why Your Bad Credit Might Be Blocking Your Dream Job

By Glassdoor - Feb 5, 2018 at 1:23PM

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A low credit score can have more of an impact on your job search than you might think.

Searching for a job can be difficult enough -- but did you know that if you have bad credit, it could be holding you back from getting the job of your dreams, or any other job for that matter? Employers may see bad credit as being irresponsible. They can't see why credit is bad, only that it is. And of course, your credit score can affect many other things in your life.

So if you're having credit issues, it's time to figure out what you can do in order to make changes and get things back on track. Read on to learn more.

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Image source: Getty Images.

HR Checks Credit Records

Studies show that as many as 60 percent of all employers do credit checks on certain prospects. If you are in the running for a great job, and you have bad credit, it could be that one mark against you that keeps you in the unemployment line. There is some good news here, though. A good many of those credit checks are not done until after a position has been offered. Because it is costly to do credit checks, it is not used as a screening tool. So, if you have done well enough throughout the hiring process, they may look at your skills, education, and experience more than your credit record.

No Credit Score "Hits"

It used to be that any time you or anyone else checked your credit, it was considered to be a "hit" on your record. When there were too many hits, it had a negative effect on credit records. This is not so much the case today, so you don't have to worry about your credit score lowering because potential employers are doing credit checks. Instead, this is what is known as a soft pull, meaning that it is recorded, but it isn't going to affect your credit score.

What You Need to Do

If you have bad credit, or you don't know what your credit score is, the time to check your score is now, before you start applying for jobs. It is actually a good idea to get into the habit of checking your credit score regularly. You can go online and get free copies of your credit report from the three main credit bureaus.

Once you have the report, you need to go over it with a fine-toothed comb to make sure that there are no errors. Around 25 percent of all credit reports contain errors of one kind or another, and you need to make sure that there are no errors that are going to affect your credit score. When the errors are fixed, you may want to contact a credit repair services agency to help you get out of debt and increase your credit score.

What Employers See in Your Credit Report

Potential employers are not able to see all of the details in your credit report, but they are able to see the big picture. There are three main things that they are going to be looking for: credit utilization, numerous credit card applications, and outstanding debts or bankruptcy.

Credit Utilization

Once you have identified any mistakes on your credit report and have reported those errors so they could be fixed, it is time to start taking action to get your credit score where it should be. The first thing you need to do is look at high credit utilization. This percentage is based on the balance of your credit cards divided by your credit limit -- ideally, this should be 30 percent or lower. Otherwise, employers may see you as someone who has gotten in too deep and can't handle a budget. 

Stop Applying for Credit Cards

Have you been applying for a variety of different credit cards? Even if you don't have a lot of cards and a high credit utilization percentage, you could still be damaging your credit score if you are applying for many credit cards. Each time you apply for a new credit card, it is a hit on your credit score, and you will lose points temporarily.

Also, potential employers can see when you have a lot of credit inquiries, and it shows them that you need money. So, you may not be trying to get the job because you want it, but because you desperately need it, and maybe you won't be the best worker once you have your debts paid. While you are searching for a job, try to avoid applying for credit cards.

Debt and Bankruptcy

Employers are also going to be looking at your total debt, which can include all of your credit card balances, outstanding bill and loan balances, etc. They will also be looking to see if you have recently declared bankruptcy. After all, they are the ones who are offering the salary, so they know how much you will be making, and whether or not you will be earning enough to pay your debts without having to take on a second job. Also, they might see outstanding debts and bankruptcy as a sign of how well you manage things, which can include any work responsibilities.

Be Honest

If a potential employer asks you about your credit situation, it is never a good idea to try to bluff your way through the conversation. After all, they can easily read your credit report. So be honest with them, and don't apologize for your issues, whine, or be defensive. Just be straightforward and to the point -- tell them what happened, what you learned and how you have been working to fix the problems. Your honesty and commitment to problem-solving might just help you land the job.

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