Could a bad credit report prevent you from getting a job? Maybe.
How and when an employer can pull your credit report is governed by the Fair Credit Reporting Act (FCRA). All of the regulations on how an employer can use your credit report for employment screening can be found starting on page 60 of the Federal Trade Commission’s text on the Fair Credit Reporting Act. The FCRA requires employers to:
- Get your consent before pulling the report
- Give you a warning (along with a copy of the report received) if they plan to reject you on the basis of the report
- Give you an official adverse action notice if they do not hire you because of the contents of the report
In addition to the FCRA, several states have also passed laws and regulations on if and how credit reports can be used for employment decisions.
According to the National Conference for State Legislatures:
“The total number of states that limit employers’ use of credit information in employment is now 11: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington. Washington enacted legislation in 2007, Hawaii enacted legislation in 2009, Illinois and Oregon enacted legislation in 2010. California, Connecticut and Maryland enacted legislation in 2011. Vermont enacted its legislation in 2012. Colorado and Nevada enacted legislation in 2013. Delaware prohibited a public employer from inquiring into or considering the criminal record, criminal history or credit history or score of an applicant before it makes a conditional offer to the applicant in 2014. The remaining states allow for the use of credit information in employment decisions.”
If you have questions on use of credit in employment decisions, you can contact your state department of labor.
So what do you need to do if you are in a state that can use your credit report for employment decisions?
- Review your credit report. You can get a free report anytime from Credit Karma, Credit Sesame or once every 12 months from www.annualcreditreport.com.
- Correct any errors on your report. Information on how to dispute or correct errors can be found here.
- Get help with credit repair from a financial counselor, financial coach or credit counselor. They can explain which steps to take to improve your credit rating and point you toward healthy financial habits.
- Be prepared to address problems. If you know that an employer is going to pull your report, you have the opportunity to address any potential issues in advance and explain what steps you are taking to rectify them.