Denied a Job Because of Credit? Here’s What You Need to Know
Have you ever applied for a job, made it through multiple rounds of interviews, only to be told you didn’t get the position—and then found out it was because of your credit history? Many people are denied a job because of credit issues, and while it might seem unfair, in some cases, it’s perfectly legal.
This article will break down why employers check credit, your legal rights, how you can protect yourself, and what to do if you’re denied a job because of credit problems.
Table of Contents
Why Do Employers Check Credit?
Employers, especially those hiring for financial, government, or high-security positions, often want to assess a candidate’s trustworthiness. They may believe that someone with poor credit might:
- Be more tempted to commit theft or fraud
- Have difficulty managing responsibilities
- Be less organized or reliable
Credit checks are most commonly used for positions involving:
- Handling money or financial accounts
- Sensitive personal data
- Access to proprietary or confidential information
Still, being denied a job because of credit can feel like being punished for financial hardship, even if it was beyond your control.
Is It Legal to Be Denied a Job Because of Credit?
Yes—and no.
Whether or not an employer can legally reject you due to your credit depends on where you live and the type of job you’re applying for.
Federal Law
Under the Fair Credit Reporting Act (FCRA), employers can review your credit report for employment purposes, but only with your written permission.
If an employer is going to deny you a job because of credit, they must:
- Notify you in writing before taking any adverse action (this is called a “pre-adverse action notice”).
- Provide you with a copy of your credit report.
- Give you a summary of your rights under the FCRA.
- Give you a chance to respond or explain before making a final decision.
- If they still decide to reject you, they must send a final adverse action notice.
So yes, they can deny you a job because of credit, but they have to follow these legal steps.
State Laws
Several states limit or prohibit the use of credit checks in employment decisions. These include, but not limited to:
- California
- Colorado
- Connecticut
- Hawaii
- Illinois
- Maryland
- Nevada
- Oregon
- Vermont
- Washington
If you live in one of these states, you may not be legally denied a job because of credit, unless the job falls under a specific exemption (such as law enforcement, banking, or positions requiring a security clearance).
What Employers See in a Credit Check
It’s important to note that employers don’t see your credit score. They receive a modified version of your credit report which may include:
- Outstanding debts
- Late payments
- Bankruptcies
- Foreclosures
- Collections
- Judgments or liens
The report should not include your actual credit score or account numbers.
Even so, if you’re denied a job because of credit, it means something in that report raised concerns.
What to Do If You’re Denied a Job Because of Credit
If you’ve been denied a job because of credit, it’s important not to panic. Here are the steps you should take:
1. Request the Credit Report
You have the right to get a free copy of the credit report the employer used. Request it immediately so you can see what they saw.
2. Look for Errors
Credit reports often contain mistakes. Review yours carefully. If something is wrong—like a debt that isn’t yours or an account wrongly listed as unpaid—dispute it with the credit bureau.
If an error led to you being denied a job because of credit, fixing it could open doors again.
3. Submit an Explanation
If your credit report is accurate but includes negative items due to circumstances like medical bills, divorce, or job loss, write a brief, professional explanation to provide to future employers.
Many hiring managers appreciate honesty and context, especially if you’re actively working to improve your financial situation.
4. Know Your Rights
If the employer didn’t give you proper notice or follow the FCRA steps, you may have a legal claim. Contact the Consumer Financial Protection Bureau (CFPB) or consult a labor attorney.
Being denied a job because of credit without the required notices is a violation of your rights.
How to Prevent Being Denied a Job Because of Credit
Even if your credit history isn’t perfect, you can take steps to reduce your chances of rejection:
1. Check Your Credit Before Applying
Get a free credit report at AnnualCreditReport.com. Know what’s on it, fix any errors, and be prepared to explain any negatives.
2. Be Honest and Proactive
If you suspect the employer will run a credit check, bring it up early. For example:
“I want to be transparent—I had some financial difficulties after a medical emergency two years ago. I’m now caught up on all my payments and continuing to improve my credit.”
This shows responsibility, not avoidance.
3. Improve Your Credit Over Time
To avoid being denied a job because of credit in the future, work on your credit health:
- Pay bills on time
- Reduce credit card debt
- Avoid new hard inquiries
- Set up payment plans if needed
It will take time, but every step counts. Showing that you have been working towards fixing your credit can go a long way.
Can You Sue If You’re Denied a Job Because of Credit?
Yes, but only in certain cases. You may have a valid legal claim if:
- The employer didn’t get your written permission
- You weren’t given a copy of your credit report or a chance to respond
- You were rejected for a job in a state where credit checks are prohibited
- The report used was inaccurate and uncorrected
Consult an employment attorney or file a complaint with the Equal Employment Opportunity Commission (EEOC) or the CFPB.
Final Thoughts
Being denied a job because of credit can feel deeply personal and discouraging, but you are not powerless. Know your rights, monitor your credit, and take steps to control your financial future.
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Disclaimer: This article is intended for informational purposes only. It provides general information and is not intended and should not be construed as professional advice. The author is not your attorney, accountant, financial planner or any other professional and no professional-client relationship is created. We do not represent that the information provided is accurate or up-to-date as laws and regulations are always changing. If you have an issue that requires professional help, you should contact the appropriate professional to help you on your on your specific set of facts. Please read the Terms and Conditions for additional information.
Human resources professionals – check out our HR compliance site New England Human Capital.
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