Can Bad Credit Affect You Getting A Job?

Updated: November 28, 2023 Author:

Quick Answer: Yes. Having bad credit can prevent you from reaching the interview stage. However, job advertisements will stipulate when a credit check is part of the applicant screening process. Companies require your permission to check your credit history.

    Why Companies Conduct Pre-Employment Screening / Vetting

    When you apply for a job, employers are legally required to screen you to at least ascertain that you have the right to work in Britain. The vast majority will ask for photo ID documents. Passport, or Driving License details. Certain roles require additional background checks, namely a DBS check (Disclosure and Barring Service). In the financial services industry, it’s not uncommon for the vetting process to venture into credit checks to try and determine your financial stability. 

    They aren’t just looking for a top-level credit score. They want to assess your competence with finances. If you’re considered to have bad credit but are now building your profile by using credit cards to improve your credit score and have a solid foundation of good credit practices, the negative entries may be overlooked, especially if they’re about to drop from your report. Debts don’t stay on your credit report forever.

    What Types of Companies Credit Check Applicants

    Any company involved in financial and legal services will usually conduct a financial background vetting test by running an in-depth search on your credit reports. This is a hard pull and it will lower your credit score slightly, or lots if you apply for multiple jobs that require credit checks in quick succession. If your profession is legal or you’re a finance professional, such as a lawyer or accountant, a bad credit score is likely to spell bad news for getting hired. Even in customer-facing roles as a customer service assistant in an accounts department, financial firms still credit check applicants. 

    Customer service roles for debt collection agencies, no surprise, usually require applicants to pass a credit check. In any sector where you’ll be handling large sums of money, credit checks are likely. As an example, a front-line supervisor of a retailer or restaurant is likely to be responsible for the cash drop of tills (taking the money from the cashier tills to put into the safe). Naturally, when dealing with large sums of cash, companies will want to know you’re not desperate for cash and that the salary they’re offering is sufficient to meet your lifestyle. 

    When You Apply for a Job with a Credit Check Disclosure, Consent is Assumed

    Firms require your permission to pull data from your credit file. On the job advertisements, credit check disclosures are provided. The wording can be along the lines of, ‘due to the nature of our business, applicants are required to pass a DBS check, a credit check, and a gap verification check’ to explain gaps in your CV. It’s unlikely you’ll reach the interview stage with bad credit because, as part of narrowing down the selection of candidates, employers rule out applicants with a CCJ, IVA, or if they see a bankruptcy on your credit file. That’s all they’re looking for. When you apply for a position that has stated your credit files will be checked, your application alone could be the consent. The company will not contact you to ask permission to run a credit check. They assume that since they disclosed the information, you have understood that they are going to run a credit check. If they don’t though, it is not uncommon to go through an induction process, then on the conditional offer of employment, there’ll be a box to check to consent to a credit check. Bad credit can mean the conditional employment offer is withdrawn as it is subject to passing a credit check.

    What Credit Checks Can Tell Employers about Potential Hires?

    In certain industries, security and ethical practices are a concern. Data security in particular, when you’re being trusted with sensitive material which, in the wrong hands, could be worth a lot of money. It’s no secret that those in debt have been known to resort to unscrupulous activities. Applicants who are financially stable are likely less susceptible to bribery. That’s the theory anyway. It’s based on the presumption of acting out of need rather than greed, so it’s far from a foolproof check. 

    Enhanced Vetting by Companies to Assess Potential Job Performance 

    Corporations with HR teams can afford to do deeper dives into their candidate’s background checks. They can be looking for more than a bad credit history; instead, they are looking for potential signs of financial stress. The ONS (Office of National Statistics) is a powerhouse of data for corporations to understand how things are affecting people in communities. If a company’s goal is to lower absenteeism, they’d be more inclined to hire someone with a balanced credit utilisation instead of someone neck-deep in debt. Then again, for roles with performance tied to financial incentives, a high debt ratio could tell them you’re the person more likely to put in the hours to close sales. Some may say the system is backward because credit checks ensure firms hire those who will be the least dependent on their salary. 

    Furthermore, hard credit checks reveal your financial associations, so if your partner has bad credit, it could have an impact on your job prospects if there’s a financial connection such as shared finance agreements. 

    The Impact of Bad Credit on Job Prospects

    Regardless of what industry or sector you’re looking for work in, with bad credit, you may want to consider smaller firms. Larger firms with hundreds of employees and HR teams with the time and budget to deep dive into your personal history could mean higher barriers to employment. Apply to work with small startups, emerging SME’s, and established local independent firms. National and particularly global companies with offices overseas are the companies most likely to have meticulous screening processes, simply because they have stringent data control processes they need to adhere to for legal purposes. 

    In some sectors, it could be easier to finance your own business than it is to get hired. Take a van driver as an example. Couriers are driving around with a company van and thousands of pounds worth of merchandise. Credit checking may be done by employers, in which case a history of bad credit could see you rejected for the job. If you were to approach it from a different angle though, you could get van finance for people with bad credit and approach companies for the same role as a subcontractor rather than an employee. 

    Will a Name Change Show Employers’ Previous Aliases 

    Yes. While getting married doesn’t change your credit score, it does change your personal data. Changing your name doesn’t reset your credit history. Aliases are shown on your credit report. And it should be current. When you get married, or divorced and switch back to using your maiden name, you should check with all three credit scoring agencies to have their records updated to reflect your name change. Part of the credit check process employers do is for identity verification. (That’s the soft check that only you see on your files). If you apply for a job with your maiden name that doesn’t match the name on your credit report, you’ll fall at the first hurdle of having your identity verified. The credit check becomes irrelevant at that point because, without proof of identity, you can’t be hired to work in the UK. 

    Is being Refused a Job because of Bad Credit Financial or Credit Discrimination?

    Similar to the U.S Equal Credit Opportunity Act (EOCA), the UK has similar rules within the Consumer Credit Directive that apply to creditors. Not recruiters. Discrimination in recruitment only applies to “protected characteristics” which include things like age, gender, disability, religion, etc. What isn’t allowed is to rule you out of a job opportunity purely based on automated decisions. If you are rejected by a company that cites your credit report as a reason for dropping you out of the recruitment process, under  GDPR Article 22, companies must be open to requests to manually review your circumstances at your request. Whether it’s worth it or not is a different question. The best bet is to work on improving your credit score, apply for roles with less responsibility, and with smaller companies without big budgets to research your past.