Bad credit can limit your ability to get a loan or score a low-interest rate on a credit card, but that's not all it can do. It can also rear its ugly head in the workplace, making it harder for you to do your job or even -- in a frustrating catch-22 -- keep you from getting a job that could help you break your cycle of debt and poor credit.
Teresa Turner, right, a former Realtor in California whose livelihood was decimated when the real estate market crashed, knows this firsthand. When her business started to go south in early 2008, she began relying on credit cards, confident she could ride out a slow patch. Today, she's considering filing for bankruptcy, and she suspects her problem landing a new job is directly related to the hit her formerly good credit has taken in the interim."Typically, during a normal economy, I can find a job within three weeks," says Turner. "Now, it's obviously been a lot more challenging. When you send out resumes, you don't get any kind of response."
Turner's been pounding the digital pavement, looking for a job in property management, as a Realtor's assistant or even as a general administrative staffer. Unable to land even a job for which she's overqualified, Turner says she suspects her $30,000 in unpaid debt and ability to catch up on her payments are the culprit.
More than once, Turner says, a potential employer has expressed an interest, then backed off when Turner gave them the heads-up that her credit history was blemished due to her prolonged unemployment.
"In one of the emails I got back once I'd explained to them my situation via email, they said if someone commits fraud, they have a low credit score," Turner says. "At that point, I felt I was being labeled as undesirable or a crook. I felt like it was discriminatory." Other times, when she was forthcoming about her financial hardship, hiring managers just stopped communicating with her.
"The credit score is a great equalizer," says Bruce Hurwitz, president and CEO of Hurwitz Staffing Services, explaining why employers use your financial history as a screening tool. (One point: Employers don't actually see your three-digit FICO score if they do a background check that includes a credit check; what they get is your credit report, which shows things like missed payments, chargeoffs and accounts gone to collections, all of which could be potential red flags.) Nevertheless, in this still-challenging labor market, companies can afford to be picky.
John Beaudette, vice president and operations manager for Employment Screening Services in Washington, says only 13% of employers do credit checks on everyone they hire, while 47% include them for certain positions, such as jobs that involve handling financial accounts, cash or valuables. For his firm, Beaudette says only 20% to 30% of clients request such information, and adds that industries such as financial services, insurance and security tend to rely more heavily on credit checks. If your credit is wrecked and you're out of work, it's probably best to look for a job that won't require a high degree of financial autonomy.
Even if you have a job, lousy credit can make it more difficult for you to do your job and garner the respect of your colleagues and bosses. A judgment against you by a collection agency can lead to wage garnishment, which forces your employer to get involved in your financial struggles.
"People are amazed at the level you can be dragged through the mud when there's a judgment against you," says Erik Kardatzke, a garnishment attorney in Florida. "At least half the time they didn't know they had a judgment." On the other hand, Kardatzke says some collection agents will illegally call your workplace repeatedly and talk to your colleagues about your money problems. If this happens, Kardatzke says you can take legal action, but the damage to your reputation at work may already be done.
If a judgment awards a creditor the right to garnish your wages, Kardatzke says they're entitled to 25% of your disposable income per paycheck until the debt is paid off. Different states have different procedures and exemptions, so it may be worth hiring a legal professional to fight the garnishment attempt. Be prepared to assure your boss, though, that your legal and fiscal troubles won't interfere with your job performance.
Poor credit can also put a crimp in your ability to do your job if your position requires travel, since activities like booking airline tickets, or reserving hotel rooms and rental cars require a credit card. While some big companies have corporate credit cards that can be used for this, this option isn't available to everybody. (Some small businesspeople and consultants like using their own cards because they can then keep any rewards they earn on their spending.)
Without a credit card, though, business travel grinds to a halt. Carol Margolis, a travel consultant in Florida, says she's forced to use her own personal credit card and put her own financial security on the line when one of her team members doesn't have a credit card for expenses. While she says she's never had anyone abuse this privilege by, say, raiding the minibar on a nightly basis, the accounting is a tremendous headache. "When a team members comes to me and says they don't have a credit card, I try not to let my face sink," she says.
In addition, the lack of a credit card can make a businessperson look bad in front of customers, Margolis says. "If they're expected to take a client out to dinner, they can't," she says, "and it makes them look bad." As a result, Margolis has to take extra time and effort to make sure credit-less team members only go on trips with colleagues who do have cards.
Margolis says she prefers employees to be honest about their limitations, recalling one woman who would make up stories about her wallet being stolen -- repeatedly -- to cover up the fact that she didn't have access to a credit card. She admits, though, that even full disclosure leaves her with a bad taste in her mouth.
"Once I hear they don't have a credit card, the respect I have for that person goes down," she explains. "I think, they may be able to do their job okay, but they can't handle their life."
Honesty is still the best policy when it comes to bad credit in the workplace, but that has to be combined with a willingness to tell bosses and coworkers who are affected by your credit how you're working to improve your situation.
"The idea is to convey that you know your situation, you're not hiding anything, you've got it under control to the greatest extent possible, and it's your priority to fix the problem," says Hurwitz.
Even if your credit is in shambles, don't give up hope. Hurwitz says he's heard back from clients who went on to land jobs in spite of poor credit by following that basic script.
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