By Thea Nyberg
Maria W. * had just interviewed for her dream job at a PR agency. The meeting was positive and she was hoping for a job offer when she got the call. "I was informed that they had decided to go with their second-choice candidate," says Maria. "I had failed their credit check."
With 9.7 percent (Bureau of Labor Statistics) of American workers currently out of a job and their bills mounting, Maria's story is becoming all too common. Dennis Nason, CEO of the recruiting firm Nason & Nason, says that long-term unemployment has created a snowball effect. "The longer one is out of work, the more [you] rely on credit and the tougher it is to make payments," he says. "If you are late the rates go up, banks cut credit and your score plummets even lower, making it tougher to find a job."
According to Nason, employers are looking at credit reports to find patterns or destructive habits that would be a security risk or detrimental to the work environment. Nason explains that a credit score below 700 is a warning, below 650 is a concern and below 600 is considered a red flag. Although some employers try to look past the numbers, rigid company policy can prevent them from being sympathetic.
So what can a job seeker with poor credit do?
1. Understand your rights
Under the Fair Credit Reporting Act (FCRA), employers must gain permission to conduct a background or credit check. Additionally, employers must notify the job seeker if their credit score was the reason they were not hired. The employer must also report which credit reporting agency provided the information and provide a copy of the report so that the accuracy of its contents can be reviewed by the prospective employee.
Jordan Goodman, personal-finance expert and author of "Master Your Debt" explains that each credit reporting agency (Equifax, Experian and TransUnion) must provide consumers with one free report a year, which was mandated by the FCRA. "Spread them out throughout the year," says Goodman. "You cannot get your score for free, though, just your report." To obtain the free yearly report, go to annualcreditreport.com, a Web site maintained by the three nationwide consumer reporting agencies.
In two states- Washington and Hawaii -state laws limit the use of credit histories in screening for job candidates. And in July 2009 a bill was introduced, H.R. 3149: The Equal Employment for All Act, which aims to amend the FCRA to prevent employers from using credit checks in their employment decisions against prospective and current employees. The bill's progress can be tracked through congress via Web sites such as govtrack.us and opencongress.org.
2. Know where you stand
"Pull your own credit report when you're considering applying for jobs," says personal-finance expert Peter Dunn, author of 60 Days to Change: A Daily How-to Guide with Actionable Tips for Improving Your Financial Life. "If you're on top of your credit report, you won't encounter any surprises during interviews." Dunn also suggests being prepared in advance by knowing which job applications are likely to result in a credit check. "Nearly all federal, state, and local government employers will look at your credit status, as well as institutions/organizations (including nonprofits) that are at all regulated," he explains.
To keep an eye on your credit, Goodman recommends signing up for yearly service at guardmycredit.com, an Equifax credit watch system. The site allows you to look at your score in great detail and identify theft or inaccuracies, and alerts you when your score goes up or down.
3. Be upfront
When discussing your credit situation with a prospective employer, candor is always best, explains Dunn. "There's no need to apologize to a prospective employer for your problems. Don't whine or get defensive. Try to put yourself in the prospective employer's shoes. Would you hire you?" he says. Goodman also recommends an up-front approach. "You have to show how you handled the situation as responsibly as possible," he says. Most importantly, Goodman suggests, you have to make a case for your employment. "Show enterprise and make yourself unique and valuable," he says. "Really understand the company you are applying [to] and what you bring to the table that will make them better. Make it easy for them to say 'yes' and hard to say 'no.'"
4. Clean up your credit - quickly
Job hunters should scrutinize their reports very carefully and take care of any issues that may be negatively affecting their credit, according to Goodman. "Under the FCRA, consumers have the right to challenge derogatory credit--inaccurate or accurate--on their report," he explains. "The original creditor has 30 days to respond, and if they don't respond within 30 days, it goes off the report."
Although a poor credit rating may seem beyond repair to frustrated job seekers, Dunn suggests the following steps to improve your score quickly.
1. Get current on your bill and credit card payments.
2. If you are behind, call your creditor(s) and work out a payment plan.
3. Do not ignore your bills-especially those in collection.
4. Here's an incentive: just two months of making your payments on time can improve your score by 20-30 points.
*Name has been changed to protect identity.
Based in Seattle, Thea Nyberg is a freelance writer and editor.