Yes, You Can Get Fired For Having Bad Credit
Most people know that employers can check your credit score while hiring you, but they can also do it while you work there—and let you go if the results are bad.
If you were to make a list of things that would get you fired, where would you rank “having a bad credit score?” Surely it would be below all-time classics like “stealing money,” “calling your boss a bad word,” and “insisting that your coworkers call you Lord Fancy Pants The Fourth.” Honestly, most people don’t even realize that you can get fired for having a poor credit score.
But you can! And while it’s unlikely that a lousy credit score will get you canned—it’s much more likely to stop you from being hired in the first place—it certainly can happen, especially if you’re in one of the many states that don’t restrict the use of employer credit checks.
A quick refresher on creditworthiness and credit checks.
Your creditworthiness is summed up by your credit score, a three-digit number that created using information from your credit reports. The most common type of credit score is a FICO score, which was first created by Fair, Isaac and Company in the 1980’s (they’ve since changed their name to just FICO). Your FICO score is ranked on a scale from 300 to 850—the higher your score, the more creditworthy you’re considered to be.
Credit reports are documents that track your history of credit use. Most of the information on your reports date back seven years, but some information (like bankruptcies) can stay on your report for longer. Credit reports contain information on how much you owe, whether you pay your bills on time, the types of credit you have, recent hard credit checks, etc.
There aren’t any hard and fast rules on what defines “great” credit versus “good” or “bad” credit, but there are some general guidelines you can follow. If you have a score above 720, you won’t have to worry much about having a personal loan/apartment/job application denied or getting slammed with high interest rates. Meanwhile, if your score is below 630, that pretty much means you have bad credit and could find yourself paying for it in all sorts of ways.
When it comes to credit checks, only “hard” checks affect your score. These return a full copy of your report, unlike “soft” checks which only return a summary of your credit history. Hard credit checks are often run by potential lenders and landlords, but they can also be run by prospective or current employers. In order to run a hard check on your credit, the business in question must first obtain your express permission.
Want to read more about the difference between hard and soft credit checks? We’ve got a blog for that: How are Soft Credit Checks Different From Hard Checks?
Employers can check your credit before and after you are hired.
When it comes to credit checks and the possibility of unemployment, you are much more likely to run into problems while applying for a position than you are after you’ve been hired. Checking credit history as part of a background check is a fairly common part of the hiring process.
Depending on how that long hiring process lasts, though, you might end up serving in the job for a while before the employer gets the results and decides to terminate you. Additionally, employers can run a credit check after you’ve been hired or if you are up for a promotion and let you go if the results send up a red flag.
(Everything in this section depends on which state you live in. For a list of states that restricts how employers can use credit checks, scroll down.)
One thing that’s important to note here: These pre-employment credit checks will not actually return a copy of your credit score. Instead, they will only return a copy of your credit report. This will allow employers to view, for instance, your debt-to-income ratio and your history of bill payments.
Even with just a copy of your credit report, employers will be able to get a pretty good idea of how you have managed your debts over time, even if they aren’t given a single score to sum it all up. So if you have a bad credit score, your employment status could be at risk.
While there are no defined limits on what roles can require a credit check, it tends to be much more common in certain industries and job types than it is in others. Jobs in financial industries or finance positions—especially ones where you will be handling large amounts of money—commonly carry requirements for a credit check.
Certain states and cities limit what employers can do with credit checks.
If it hasn’t been made clear by now, the laws under the Fair Credit Reporting Act (FCRA) that dictate employer credit checks give them a fair amount of leeway. While a current or potential employer needs your permission to run a credit check, refusing to grant them that permission pretty much means that you either won’t get the job or won’t have your current job for long.
This is why 13 states, two cities, and the District of Columbia have passed laws limiting employers’ ability to check people’s credit. According to the good folks at Microbilt, an alternative credit reporting agency, the following areas have laws designed to rein in how employers use a person’s credit information:
- Chicago, Illinois
- New York City, New York
- Washington State
- Washington, D.C.
While the specifics vary from state to state (or city to city), many of them limit credit checks to managerial positions, finance jobs, or public safety officers. Some also limit what decisions can be made with this information, while a few of them outright ban the practice entirely. If you live in one of these areas, you can read more about your local laws in Microbilt’s report: State Laws Limiting Use of Credit Information For Employment.
When you have bad credit, an unexpected bill can mean turning to predatory no credit check loans like payday loans, cash advances, and title loans in order to get by. That part’s pretty obvious. And yet, bad credit can also affect your life in so many more additional ways. For more information on how a bad credit score can negatively impact your everyday life, check out these related posts and articles from OppLoans:
- How Bad Credit Can Affect Your Utilities
- Shopping for Furniture with a Bad Credit Score? Here’s What You Need to Know
- Can Bad Credit Keep You From Getting That Apartment?
The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.