You lose your job. The bills are rolling in. You start falling behind in your payments, robbing Peter to pay Paul. You try to find employment so you can climb out of your deepening financial hole; you secure a job interview, make it to the next round and then to the final interview ... and then you get the golden ticket -- the job offer. But not so fast. The offer is contingent on a background check that includes a credit check. Now what?
According to a 2010 study by the Society of Human Resources Management, 47 percent of companies conduct pre-employment credit checks on some candidates and 13 percent conduct them on all candidates. Credit checks may be performed to reduce or prevent theft or embezzlement, to minimize legal liability for negligent hiring or retention, to assess overall trustworthiness of job candidates, or to comply with state laws. So what type of applicant is most likely to be subject to a credit check?
Annie Hoffnung, an HR director who has worked for insurance, investment banking, and public relations firms, says that "anyone with financial-services responsibilities may be subject to a credit check." Other experts say that credit checks are now routinely being done on HR and health-care professionals who have access to personal information -- Social Security numbers, birth dates, and addresses -- that could be misused to steal someone's identity. A person in IT at an e-commerce company might also be screened, as they would have access to customer credit-card numbers.
Companies using a consumer reporting agency to source credit information must adhere to Fair Credit Reporting Act compliance, including disclosure and authorization, certification, and advance notice of adverse action. The employer must provide written notice to the applicant explaining that an investigative consumer report will be obtained and secure the applicant's signed consent. The request for a credit check is often disclosed in the applicant's offer letter but may be addressed before the offer is made.
OK, so now you have a good idea whose credit might be checked and what your rights are. But what can you do if you have a less-than-perfect credit rating?
Be prepared to explain your credit history.
Poor credit can happen for many reasons. If your credit history was compromised by a financially draining divorce, unplanned medical expenses, lost bills, lack of credit history, or even identity theft, explain your circumstances. Sixty-five percent of the companies SHRM surveyed give candidates the opportunity to explain their credit history.
Bring the focus back to the value you can bring to the company.
Focus on selling your candidacy, showcasing strong employment references, proving you are responsible and trustworthy, and building rapport with the hiring manager. According to management development consultant Joni Daniels, "the perception may be that if you can't handle your money/bills perfectly, you can't handle anyone else's. But bad credit has nothing to do with honesty or the ability to perform well in a position that requires dealing with financial matters."
An employer can rescind an offer due to poor credit history, but the employer is required to tell you if that was the reason for the rejection and show you a copy of the credit report they used to make their decision.
Some employers may be willing to extend a job offer to someone with credit issues with the understanding that they have a defined period of time to clean up these issues.
Make sure the report is accurate.
In addition, you should obtain a free copy of your credit report. According to Pricewaterhouse Coopers Certified Financial Planner and credit reports expert Gregory McGraime, "one out of five individuals has a serious error on their credit report and does not even know it. It can take 30, 60, or 90 days to get corrected, so this is not something you want to delay doing."