With a good credit score and an established credit history, life gets much easier. Just ask anyone who has ever been denied a home loan, been unable to secure a car loan, or had to get a co-signer to get an apartment because of their poor credit.
But did you know that bad credit – or negative marks on your credit history – could actually hurt your chances at getting a job, too?
How Bad Credit Can Derail Your Job Search
It’s true. According to credit reporting agency Experian, federal law allows potential and current employers to see a modified version of your credit report for purposes such as hiring and promoting.
Since some employers feel there is a connection between personal responsibility and personal credit use, this allows them to take a peek at your report to see how you handle your personal financial and credit health.
However, there are some caveats to this:
- Employers cannot see your full report – they get a modified version instead.
- The modified version of your report does include relevant details about your loans and any open credit cards you have.
- Details such as account numbers, year of birth, and your spouse’s intimate details are excluded from this report.
- Your employer or potential employer must get your permission, in writing, before accessing a modified version of your credit report.
- When this report is pulled, it does not count as a hard inquiry on your report. Instead, it is filed away in the “Requests for Your Credit History” section.
- A handful of states, including California, limit this practice to jobs with financial or management responsibilities.
In other words, potential employers are able to see the bulk of your report, minus your personal information, and use it against you. If you should happen to deny an employer’s request to see your report, that may also raise red flags.
With that being said, your employer does not get to see your actual credit score, which is the three-digit manifestation of your overall credit health.
How Can I Improve My Credit?
If you’re worried you may be passed over for a potential job opportunity due to a hairy stretch in your credit report, it’s wise to take action now. It would be a shame to lose out on a job or career based only on credit mistakes you’ve made in the past, right?
In “Five Simple Steps to Improve Your Credit,” we detailed a number of steps you can take to improve your credit health and increase your score over time. Those steps include:
Get a copy of your credit report. What you don’t know can hurt you. In order to fix your own credit mess, you have to know what’s on your report. To get a free copy of your report from all three credit reporting agencies, visit AnnualCreditReport.com.
Pay off delinquent accounts and debts. To repair any credit messes, you’ll first want to focus your efforts on any amounts you owe that are past due. After that, start paying down the rest of your debts and stop taking on new debts. Since your credit utilization — how much you owe vs. your overall credit limit — makes up a big part of your score, paying off debt is a great way to improve your total credit profile.
Pay bills on time. This is a big one. Since payment history makes up 35% of your credit score, it’s important to pay all of your bills on time, every month. And since potential employers may be able to see late payments, it’s crucial to avoid them at all costs.
Don’t open new accounts. Since employers can see the number of loans and open accounts you have, it might be wise to avoid opening any new accounts for the time being. Instead of opening new credit, focus on improving the credit lines you already have.
If you’re not careful, a bad credit history can do a lot more than make it hard to buy a home or take out a loan for a car; it can actually cost you the job of your dreams. If you’re worried that could happen, it’s on you to take actionable steps to make sure it doesn’t.
You can wreck your credit in a matter of months, but it takes time to build it back up. But if you start now, you’ll be a lot better off – and a lot closer to never having to worry about your credit again.