Aha! This is actually a trick question, one that your interviewer should NOT be asking you.
Why is this?
Essentially, asking someone if they have outstanding debt is like checking their credit history without permission. The only way this question is legal is if you have signed an agreement granting the potential employer access to your credit history. If you haven't signed anything or given the employer permission to check your credit, this is a question that should not come up in an interview.
Why Would You Be Asked This Question?
When an employer is considering candidates for a new job, they want to make sure that they are hiring the most responsible, professional and hard-working person. Handling money and debt properly is a very good indication of how responsible people are, so employers will often avoid hiring people with bad debt.
Of course, the law states that you can only be denied employment if your debt could in any way impair your ability to perform your job. That is why this question isn't legal, as it should have little or no effect on the decision to hire you or not.
Point Out That It's Illegal
If the question is posed to you, it could be in your best interest to point out that the interviewer is not legally allowed to ask you that question. Being honest up front and stopping the line of inquiry will prevent the interviewer from asking other illegal questions regarding your sexual affinity, political affiliation, arrest record, etc.
However, the downside of refusing to answer this question is that it may make you look like you're trying to hide something. It may be in your best interest to answer this question, but make sure to consider it carefully. If you have no debt, you have no reason not to answer. If you have debt, however, that's when things get a bit tricky.
How to Answer the Question
You don't want your debt to ruin your chances of getting the job, so it's important that you know your credit score before you sign the release allowing your employer to check it. You don't want to say "No" to an employer, because it makes it look like you have something to hide.
Millions of people suffer under the burden of debt, and there is nothing to be ashamed of if you are one of those. Don't be flippant about it, but don't let it freak you out either. Take responsibility for your debt, but show that you're handling it like a responsible adult.
There are few ways you can answer the question:
- "When I was in college, I was unprepared to handle financial responsibility and thus ended up in debt. I have been working to repair my credit, and will be out from under debt in X-number of years."
- "I got in debt X-number of years ago, but have worked to keep my credit clean for the last few years. It will take time to repair my score, but my past should in no way affect the decision to hire me."
- "When (my parents got sick, I was in a serious car accident, or other traumatic experience) happened, I was forced to rely on my credit card to cover the cost. It was a difficult time where I was unable to work, but definitely an isolated incident."
There are three things to take away from this:
- Debt happens. It shouldn't stop you from being hired.
- You have nothing to hide. If you are in debt, it's nothing to be ashamed of as long as you are working to pay it off.
- Show that you're working to repair the problem. That's the sign of a mature, responsible professional.
The good news: many employers won't even check your credit score; they just ask to see if you have anything to hide.