If your FICO credit score is weak, you probably already know that this low score might keep you from qualifying for a mortgage loan, auto financing, or a new credit card. But can a low credit score keep you from landing your dream job?
The answer is a bit complicated.
Many people believe that employers check the three-digit credit scores of job applicants. But in reality, employers are forbidden from pulling your credit scores. (Yes, scores. You actually have three FICO credit scores, one from each of the three national credit bureaus — TransUnion, Experian, and Equifax.) What they can study is what is known as an employment screening report.
The Employment Credit Report
An employment screening is a version of the three credit reports that TransUnion, Experian, and Equifax maintain on you.
Experian's employment credit report, for instance, includes public record information such as bankruptcies, foreclosures, and liens. It also includes a credit history that shows any late payments that you might have made in the last seven years.
But one thing employment credit reports don't include is your three-digit FICO credit score.
You can thank the federal Fair Credit Reporting Act for this. This act limits how your credit information can be used. For example, thanks to the act, employers can't even run an employment screening — with limited exceptions — without you first providing written consent. If you refuse to provide this consent, prospective employers are forbidden to order any employment credit reports on you, though your refusal might make your potential new bosses think twice about hiring you.
If companies don't hire you because of information in your report, they must provide you with a copy of it. You can then review the report for possibly incorrect information. This gives you the chance to correct any mistakes that could cause potential employers to think less of your history with credit. (See also: What's a Split Credit Report - And How Much Is It Hurting Your Score)
When Employment Credit Reports Can Hurt
Not all employers check the credit of all potential hires. In most cases, employers will only check the credit of potential employees who will be working in a financial capacity or role.
For instance, if you are applying for a job as a chief financial officer, accountant, or bookkeeper, your employer might want to make sure that you’ve managed your own personal finances properly. The good news is you can take steps to improve your credit history, making your employment credit report more palatable to potential employers. The bad news is that improving your report takes time and discipline.
First, those negative marks on your employment credit report will take a long time to fall off. A Chapter 7 bankruptcy filing, for instance, will stay on your report for 10 years, as will a foreclosure. A late credit card payment will remain on your report for seven years.
But these financial missteps look less damaging as the years pass. Employers might not place as much weight on a bankruptcy filing that is eight years old, as long as your employment credit report doesn’t show any other financial mistakes after that filing.
So vow to pay all of your bills on time from now on. You can’t make those negative marks disappear prematurely. But you can make sure that your report remains clean from this day forward.
And while you're rebuilding your credit reports, take solace in the fact that the use of credit checks for employment is increasingly coming under fire. The Society for Human Resource Management in 2015 reported that 11 states limited employers' use of credit information in hiring decisions. The society also said that 17 additional states were considering legislation that would limit how employers can use credit information.
For instance, in Colorado, employers can't use credit information in hiring decisions unless the information is related to the job. In Delaware, most public employers can't check applicants' credit, while in Illinois employers are not allowed to rely on credit information when making hiring, firing, or compensation decisions, with limited exceptions.