How to Explain to an Employer Why Your Credit Is So Poor?

While banks and credit card companies routinely check applicants’ credit reports, some employers do so as well. According to Bankrate, in 2004, over a third of all employers conducted credit checks before hiring. If you suffer from poor credit, it doesn’t have to cost you a dream job. You can make yourself appear more desirable to a potential employer by properly explaining your past credit mishaps.

Request your free annual credit reports from all three bureaus, Experian, Equifax and TransUnion, on the website and identify any errors present that lower your credit score (see the Resources section). Formally dispute the errors with the credit bureaus.

Notify your potential employer of your damaged credit history as soon as you grant your permission to conduct a credit check. Own up to your mistakes or explain any errors on your reports and the actions that you’ve taken to correct them. Provide your potential employer with valid reasons for your poor credit reports, such as identity theft or financial circumstances beyond your control.

Write a formal letter of explanation outlining the reasons that you previously provided for your poor credit rating and send it to your employer. Explain how you’ve learned from your past mistakes and how your financial situation has improved. If the position you’re applying for has numerous applicants, this also helps your employer remember you and take your explanation into consideration when reviewing your credit files.

Provide your employer with evidence that you will make a good employee despite your damaged credit history. Letters of recommendation from previous employers or evidence of employment awards are ways in which you can demonstrate your value as an employee.


  • Pulling your credit before you begin your job search and disputing errors well ahead of time helps you fix your credit as much as possible prior to undergoing an employment credit check.

    The Fair Credit Reporting Act requires potential employers to obtain your consent before conducting a credit check. If your credit is significantly damaged, you have the right to refuse consent – although doing so may endanger your job prospects.

    If a potential employer turns you down for a job based on adverse information contained within your credit report, the employer must provide you with a copy of your credit report containing the adverse information and notify you that you also may request a free copy of your credit report from the credit bureaus.