Can Bad Credit Stop You From Getting Hired? What You Need to Know

Few things stress you out more than discovering your credit score is lower than expected. Good credit helps you secure loans, housing, and even jobs. Many employers check credit histories when making hiring decisions.

Bad credit can keep you from landing the job you want. Understanding how credit history impacts your job search helps you create a strong plan. You can still land your dream job despite less than ideal credit.

Why Do Employers Check Credit Reports?

Some prospective employers conduct criminal and financial background checks on promising candidates. They may need to take this step for legal or licensing reasons.

Jobs requiring sensitive information access or security clearance need employers to verify clean histories. They want to confirm new hires have no criminal behavior related to job responsibilities.

Employers use credit checks to evaluate hiring risks. If you have significant debt and apply for a finance management position, they may question your qualifications. They want to understand why you struggle with personal finances while advising clients.

Can You Be Turned Down for a Job Because of Bad Credit?

Yes, in many states, employers can legally deny job applicants based on credit check results. Whether they do depends on the job nature and hiring policies.

Credit checks are more common in roles involving sensitive information, financial management, or large sums of money. Employers in these industries view poor credit as a potential risk. They worry about financial stress leading to theft or fraud.

Not all employers conduct credit checks. Laws in some states and cities limit how credit reports can be used in hiring. If you apply for a job in areas with these protections, bad credit may not create barriers.

Even if an employer checks your credit, bad credit likely won’t automatically disqualify you. Employers focus on specific red flags like recent collections or unresolved debts. They care less about your overall score. Prepare an explanation and show proactive steps to improve your financial situation. You can address concerns and demonstrate your reliability as a candidate.

How Bad Credit Can Impact Your Job Search

The impact of your credit history depends on the employer type and job you want. Federal jobs and private sector jobs have different credit check rules.

Federal employers are more limited in using credit history during hiring. Private employers often have more flexibility. Some states and cities have enacted laws protecting job seekers.

Federal Jobs

Rules for federal jobs are straightforward. The federal government generally can’t deny employment based on credit check results under federal law.

If the job requires a security clearance, you may not be eligible if your credit history prevents securing it. Understand the requirements of any federal government job fully before investing time and energy applying.

Private Employers

Laws around hiring practices for private employers are more nuanced. Each state has its own laws addressing credit information use for employment purposes.

Some states and major cities have enacted legislation protecting applicants from having credit histories used against them. Most states allow private employers to use poor credit history as a lawful reason to reject applications.

If an employer conducts a credit check during hiring, they must tell you they plan to review your credit. You must provide written consent before they can pull your credit history.

Credit scores usually aren’t included in employment background checks. A detailed credit history from the past several years may be included.

Not all employers go through this time-intensive process. Some will if they’re looking for specific red flags. These employers may worry about fraud risk, security clearance needs, licensing eligibility, or bribery vulnerability.

State and Local Laws That Protect Job Applicants

The federal Fair Credit Reporting Act doesn’t prohibit employer credit checks during hiring. More than 10 states and several cities have passed regulations restricting employer ability to use credit information in employment decisions.

States with protections include:

• California
• Colorado
• Connecticut
• Delaware
• Hawaii
• Illinois
• Maryland
• Nevada
• Oregon
• Vermont
• Washington

The District of Columbia, Chicago, Philadelphia, and New York City also have protections in place.

Will Bankruptcy Prevent Me From Getting a Job?

When you file for Chapter 7 or Chapter 13 bankruptcy, it’s recorded on your credit report. It will also temporarily impact your credit score. But filing for bankruptcy doesn’t mean you won’t get a job.

Sometimes bankruptcy reflects positively on you as an applicant. If you apply for a job requiring security clearance, bankruptcy filing shows you proactively dealt with your debt. You may therefore be more difficult to bribe. In other scenarios, employers treat bankruptcy filing like any other negative credit information.

Employers generally treat bankruptcy filings the same way they handle other negative marks. Anti-discrimination laws protect you from unfair treatment. Employers can still consider your credit history when making hiring decisions if it’s relevant to the job.

What Should You Do if You Have Bad Credit and You’re Looking for a Job?

Searching for a job with bad credit can feel stressful. You can take steps to improve your chances:

• Check your credit report
• Prepare an explanation for potential employers concerned about your credit history
• Focus on jobs that won’t run employment credit checks
• Improve your credit

Check Your Credit Reports

Before you can improve your credit, you need to know where you currently stand. Run your credit report and check your credit score. You can run free credit reports from each of the three major credit bureaus once a week from annualcreditreport.com.

Carefully review all personal information and account information on each credit report. If you see errors or incorrect information, make note of it. You can dispute those errors to help boost your score.

Prepare an Explanation for Employers

If a potential employer asks about your credit history, having a short, honest explanation ready helps ease their concerns.

Briefly acknowledge the issue without oversharing personal details. You could say something like, “I went through some financial challenges in the past due to a medical emergency, but I’ve worked hard to turn things around.”

Emphasize the positive steps you’ve taken to improve your financial situation. Mention actions like consistently paying bills on time, reducing debt, or monitoring your credit. You show the employer you’re proactive and responsible.

Reassure them that your financial history won’t affect your ability to perform the job. You might add, “My experience taught me valuable lessons about financial discipline. I’m confident it won’t interfere with my ability to excel in this role.”

Keep your explanation short and professional. Focus on how you’ve taken steps to move forward. Most employers appreciate honesty and accountability, especially when paired with clear efforts to improve.

Focus on Jobs That Don’t Require Credit Checks

If you’re concerned about how credit history might affect your job search, focus on industries and roles where credit checks are less common. Many jobs don’t require credit checks.

Credit checks are typically more common for positions in finance, banking, and upper management. Employees in these roles handle sensitive information or large sums of money. Industries like retail, hospitality, food service, creative fields, healthcare, and trades rarely require credit checks. Small businesses are also less likely to conduct credit screenings during hiring.

If you’re applying for remote jobs, keep in mind that your prospective employer’s location may determine whether they can legally use credit information. Some states and cities have passed laws limiting how employers can use credit checks during hiring. If you live in one of these areas or apply for a remote job based there, these protections might apply to you.

Improve Your Credit Over Time

Improving your credit takes time. Small, consistent steps make a big difference. Focus on paying all your bills on time. Payment history has the biggest impact on your credit score.

If you have credit card debt, work on reducing your balances. Lower your credit utilization by keeping it below 30% of your credit limit. Making timely payments to reduce debt and improve credit utilization can repair your credit. Avoid applying for new credit unless absolutely necessary. New applications can temporarily lower your score.

Consistency is key. Over time, paying on time, reducing debt, and avoiding new inquiries will gradually improve your credit. Our partner Kikoff can help you build credit through consistent, manageable payments. Pair these efforts with regular credit monitoring to track your progress. Make sure no new errors or inaccuracies are reported. While it can feel slow, sticking with these steps will help you rebuild your credit and improve your financial stability.

Taking Control of Your Job Search

Before starting your job search, review your credit reports from all three major credit bureaus. Being proactive helps you spot and fix errors that might otherwise hurt your job prospects. Research whether your state or city has laws protecting job seekers from hiring discrimination based on credit history. Knowing your rights provides peace of mind and helps you focus on opportunities ahead.

Even without such protections, remember that most employers use credit checks selectively. They’re looking for specific red flags tied to the role you’re applying for. They rarely reject candidates solely for having a poor credit score. Address concerns proactively and focus on your qualifications. You can still position yourself as a strong candidate even if your credit history isn’t perfect.