Steady income is essential for most of us and is never more important than when we’re struggling financially. So, it’s understandable that many people who have bad credit histories or are considering bankruptcy are concerned about how their credit reports may affect their job opportunities. While many states place limitations on the use of credit histories in hiring, there are no such state-law restrictions in Alabama, Mississippi, or Tennessee. 

Credit reporting agencies can’t release your personal information without your consent. However, this restriction doesn’t offer much protection, since employers in most states can require that you sign an authorization for them to pull your credit report. If you choose not to do so, the employer may simply decline to consider you for employment.

How Common is the Use of Credit Reports in Hiring?

62% of respondents to a survey conducted by and the National Association of Professional Background Screeners said they used credit and financial histories in the hiring process with at least some employees. Of course, this type of check is more common for higher level positions, money-handling roles, and other positions involving fiduciary responsibility for someone else’s money or property. Still, a small percentage of survey respondents reported using this information in all hiring decisions. 

Different companies use pre-employment credit checks differently, so it can be tough to know just how your credit history will impact a specific job application. However, we know credit screening hurts many applicants. In response to a survey conducted by Demos, 10% of the unemployed said they’d been told that they wouldn’t be hired because of information included in their reports. That percentage increases among those with poor credit histories.

Negative credit history acting as a bar to employment can become a cyclical trap. Periods of unemployment naturally lead to difficulty in keeping payments current, which in turn generates negative credit entries that can make it harder to find a job. According to the Bureau of Labor Statistics (BLS), there are currently more than two million Americans who have been unemployed for 15 weeks or longer. More than one million of them have been out of work for six months or more.

This cycle can present a challenge for those in high-unemployment states, such as Mississippi. As of October 2019, Mississippi’s 5.5% unemployment rate was the second-highest in the country. During the same time period, there were more than 12,000 people involuntarily unemployed in Jackson alone. 

I would like to mention a bit of good news out of Alabama and Mississippi.  Airbus in Mobile, AL announced this month that it plans to add 275 new jobs this year.  Ingalls Shipbuilding in Pascagoula, MS was recently awarded a government contract with a potential value of $453.4 million which should keep people employed and allow for the creation of many new job opportunities.

Do Credit Histories Help Employers Make Good Decisions?

A 2012 study entitled, “Do Job Applicant Credit Histories Predict Job Performance Appraisal Ratings or Termination Decisions?” concluded that credit history did not predict either job performance or likelihood of quitting. That study is cited prominently by proponents of a bill pending in the U.S. House of Representatives. The bill, called the “Restricting Credit Checks for Employment Decisions Act,” would amend the federal Fair Credit Reporting Act (FCRA) to prohibit use of credit information in most employment decisions. 

Until that bill passes or your home state institutes protections, there are a few things you can do to minimize the negative impact your credit history could have on your chances of landing a job.

Minimizing the Impact of Your Credit Report on Job Opportunities

The first and most important step toward managing the impact your credit history may have on employment opportunities is to monitor your credit reports with all three major credit bureaus, Experian, Equifax and TransUnion. Credit reporting errors and inaccuracies are surprisingly common, and the last thing you want is to lose a job opportunity because of a collection account or late payment history that isn’t even yours. 

When you identify an inaccurate or unfamiliar entry on your credit report, dispute the item promptly–the item won’t be removed immediately, so the sooner you get the process started, the better. 

Being familiar with your credit reports will help in another way, too. Since employers must secure your permission before obtaining your credit report, you’ll know in advance whether a prospective employer will be pulling your credit history. This allows you to get out in front of any potential negative items and put them in context for your interviewer.

Most employers don’t have hard and fast rules about credit report specifics for most jobs, so giving the decision-maker a heads up about past troubles and how you’re regaining control can sometimes tip the scales in your favor. This is especially likely if a certain event like a divorce, medical problem, or period of unemployment caused a cluster of negative entries or triggered a bankruptcy filing.  Often my clients have an easier time keeping and/or finding a job after a bankruptcy filing. The emotional stress that comes along with not being able to meet your financial obligations tends to have an impact on job performance in many cases. The relief that the bankruptcy filing gives to my clients allows them to focus on their job and their family, and to get their life back in order.

Bond & Botes Helps People Struggling with Debt

For more than two decades, Bond & Botes has helped people in Alabama, Tennessee and Mississippi get out of debt and fight debt collector harassment. To learn more about your rights and options, call 877-581-3396 or fill out the contact form on this site.

Melissa Wetzel
Written by Melissa Wetzel

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