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How Your Credit Score Can Affect Company's Hiring Decision

Is Your Credit Score Standing Between You and a New Job?

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With six applicants vying for every open position, the competition in today's national job market remains as fierce as it's been in decades.  With such an abundance of candidates to choose from, many companies have to devote considerable time to sorting through all of the resumes to find the most desirable prospects.

One technique that companies are using to weed out candidates is a simple credit check.  With the job applicant's permission, the company can pull the applicant's credit information, including credit reports and credit scores, from one or more of the national credit reporting agencies.  Candidates with high credit scores typically move up on the list of possibilities, while applicants with low credit scores are usually rejected.

This reliance on credit scores may make it easier for employers to make personnel decisions, but it can have a devastating effect on otherwise-qualified jobseekers with bad credit scores.  Their low scores may have been due to a recent spell of unemployment or even to reckless spending during their college years.

A Washington Informer article from September 2009 described the problems faced by Maiya James, a 29-year-old who earned a business finance degree in college.  Her professors wrote strong letters of recommendation, and her past employers sang her praises as well, but she was unable to find a job.

"I was fresh out of college with four major credit cards and seven or eight department store cards. I was spending until I lost my job in Philadelphia, Pa., and had to relocate back to D.C. to live with my parents. The credit card people didn't want to hear any sob stories; they wanted their money. I couldn't make even the minimum payments, because
there were so many cards, and [I] finally charged them off," James told the Informer.

To make a fresh start, Ms. James filed for bankruptcy in 2003.  Unfortunately, bankruptcy filings stay on a person's credit report for up to 10 years, and as a result of her bankruptcy, and her questionable spending habits right out of college, Ms. James's credit score - six years later - was still an abysmal 530.  (A median credit score is around 720.)

Employers are increasingly using credit scores in the applicant review process as a means to measure responsibility and financial risk.  The theory is that people with low credit scores may be more tempted to commit financial crimes.  In any event, James attributed her inability to attract any job offers to her low credit score.

"I didn't realize that employers could look at my bankruptcy and judge me years later for it.  I was young and foolish," she explained, "so the past should not factor in me getting a job now."

While Congress has introduced a few bills to limit the use of credit scores as employment checks to certain finance positions and government jobs, none of those bills has been passed into law yet.  State governments in Washington and Hawaii have placed restrictions on credit score usage, however, and other state legislatures have begun debating similar bills.

Until a broader consensus to reduce or eliminate the practice of weighing job applicants according to their credit scores is reached in state governments and/or the federal government, however, your best bet is to keep a close eye on your credit score before and during the job-hunting process.

Last Updated: 17/08/2010 - 1:19 PM