What Should You Do When Bad Credit is Affecting Your Career?

You probably understand that bad credit can affect your ability to get credit as well as the interest rates you will pay when you do get credit. But did you know that bad credit can also impact you as an employee? If you are an applicant looking for work, there is a pretty good chance a potential employer will pull your credit report before making you a job offer. Even when you are working, or you are enlisted in the military, having bad credit can affect your job status. For example, some jobs require security clearance, and an employer might pull your credit report annually to renew your clearance. If you have bad credit, it will show up on your credit report for a very long time, and an employer or potential employer will likely see it. But how will they interpret it?

When employers see your bad credit report, they know this means you have struggled with money problems. Depending on the job, bad credit can negatively affect you in a couple of different ways:

  • To some employers, a high amount of debt raises a warning flag because too much debt may make you a security risk.
  • To other employers, bad credit may make you ineligible for a job-related creditworthiness or character requirement.

Bad credit is a special risk for those who need security clearance to do their jobs. Can a bill collector call your boss and report a past due bill? Although they have been known to threaten it, debt collectors are not legally able to contact your employer about your debt if you tell them that they may not. Nor do collectors have the authority to influence your Commanding Officer (CO), employer or security manager’s decisions about your clearance. However, loss of security clearance is possible because your failure to pay your debts in a timely manner may show up as negative information on your credit report. When your CO or employer pulls your credit report for review, it is the negative information there that can cause your clearance to be revoked. If you are looking for work or a promotion, negative information on your credit report can mean being denied the security clearance you need for the position you seek.

Even if you do not need security clearance, having bad credit can make looking for work – or advancing your career – difficult. Some employers may look at your credit report for an indication of your character. In jobs where you are expected to handle money, supervise or counsel others, evidence that you do not pay your bills on time can signal a failure to honor important commitments. An employer might reason that a person who fails to honor their commitments could have bad judgment, be dishonest, irresponsible or be unable to handle funds. Such traits are likely incompatible with the responsibilities of many positions you seek.

Responding to Risk
If you have bad credit and it presents a risk to your current job, what can you do? Luckily, there are a number of specific steps you can take.

  • Respond to creditor concerns. Contact your creditors as soon as there is a problem and ask what you can do to make it right; call them before they call you, if possible; have a solid plan of how to get back on track and pay off the debt on time.
  • If any debts are not yours, dispute them promptly.
  • Respond to employer concerns. If an employer or CO has concerns about your bad credit, do your best to show financial problems were the result of circumstances beyond your control rather than a pattern of irresponsible behavior.
  • Explain to a superior or potential employer how you acted responsibly, e.g., you called creditors and stayed in touch with them, or that you tried to negotiate with them on your own behalf.
  • Show that you are living within your means.
  • Show that you are making a good faith effort to resolve your debts regardless of your success in working with creditors.
  • Keep documentation of all your bills and financial commitments, your efforts to solve delinquencies, and any disputes about debts owed.
  • Ask for help from available resources. Military members have special resources. Access your Personal Finance Manager (PFM) or JAG office for free, they can offer expert advice and assistance. If necessary, consider your option to follow Department of Defense (DoD) regulations for a hearing to appeal a decision to revoke security clearance.
  • Government employees, and union and even non-union employees often have similar, civilian resources and options for a hearing or administrative review of an unfavorable decision.
  • Do you have friends or family in a position to lend you funds, put up collateral or co-sign a loan? Consider options to tap this resource if necessary to avoid losing your job. You may be able to pay back a family member with lower monthly installments over a longer period of time than a creditor would accept.
  • Seek financial counseling. Non-profit credit counseling agencies like Apprisen have the experience and knowledge required to help you get your finances back on track.

Ask to Review an Unfavorable Decision
If you end up in a formal hearing at work because your bad credit affects your job position, take it seriously. Use the opportunity to present yourself with the utmost diligence, as this will affect your current job record, and possibly your future career options. Know your organization’s processes, and find out about options to have a union steward, an attorney or non-attorney to represent you. Bring your documentation and character witnesses if you can. Be prepared to tell your side of the story, honestly, fully, and calmly. And be ready to answer questions about your mistakes, your level of responsibility, and your efforts to resolve the financial problems.

Pre-employment
If your bad debt (or prior bankruptcy filing) arises when you apply for a new job, be ready to address the issue proactively. Be prepared to explain how you quickly addressed the past debt problems and resolved or disputed the debt. In short, be able to show your potential employer you have good judgment and that you honor your commitments, despite the evidence of bad credit. Here are some other things to consider:

  • If it really was irresponsible behavior, own it, and learn from it. Distance yourself from past bad decisions as much as you can. Build as extensive a history of good credit as possible to show you learned from past mistakes and you have changed for the better.
  • Highlight changes between then and now. Explain that when the bad debt happened, you were much younger than you are now, or in temporary crisis, or very sick. Make it clear that the stability, maturity, or current level of health and/or education you now have helps to ensure you will not make same mistake.
  • Be proactive. Sometimes you know the job offer is contingent on a good credit report. In this case, you might bring it up in an interview before your report is pulled. Sometimes concerns can be addressed in a cover letter for example, and you can request a face to face interview to discuss it in detail.
  • Explain in person whenever possible. On an application with limited space, you can try writing “Will discuss in interview” or something similar.
  • Offer extra character references.

Make changes now
If your financial problems are not in your past, you have ongoing issues that you need to correct. Take a hard look at your personal finances and the way you handle your money. Do you budget or reconcile your bills? Do you have an emergency savings fund and are you able to save for your future? Do you have to use a credit card to make ends meet?

Apprisen created an online Financial Stress Test that will help you understand how bad your financial situation really is. The test only takes five minutes to complete and won’t cost you a dime.

Keep your perspective
Be aware that a bad credit history may make you ineligible for a job position. However, it would be a mistake to take this too personally. Remember, the policy or law that makes you ineligible was in place long before you came into the picture. Consider the possibility that presenting yourself very well might keep a different opportunity open to you. Reacting well to an unfavorable decision shows level-headedness and foresight. If things don’t work out for you, your best bet is to be gracious, resolve to benefit from the experience, dust yourself off, and move forward.

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