Why do employers check applicant’s credit? 

Just like speeding tickets on a driving record can indicate irresponsibility and poor judgment, so can a spotty credit report.

Employers hope to hire those that have managed their money responsibly assuming they will do the same when handling the company’s resources.  Which is why the type of job matters.  Those with fiduciary and financial responsibility (handling cash, banking), with access to sensitive, confidential information (customer service, IT, HR) are more likely to be credit checked and evaluated more strictly.    Plus, there are other  reasons to assess a candidates financial situation such as to prevent theft and embezzlement; and to reduce liability for negligent hiring.

What do they look for?

In a survey by the Society of Human Resources Management the top three reasons employers cited for withdrawing an offer were: outstanding judgments, debt collection, and bankruptcy.  Not surprisingly medical debt, tax liens and student debt ranked at the very bottom.

So what’s the best way to explain your non-stellar report to a prospective employer?

Be prepared.   Order your own credit report so you know what the employer sees.  Then, give your future employer a heads-up on what to expect.  Avoid drama, and in the best possible light explain -the difficult divorce, the layoff, the long stretch of unemployment- whatever caused the problem.   Emphasize how you plan to work your way out, -arrangements you’ve made with debtors, adjustments to your budget. Practice your explanation with a friend.  Then practice some more.

Note:  The Fair Credit Reporting Act (FCRA) ensures employers can’t check your credit unless you grant written permission.  You’ll know when it happens.