Employer credit checks: What you need to know

You probably already know you need to polish your resume, practice your interview skills, and create a list of positive references when you are looking for a new job. However, there’s something else that might impact your ability to get hired: your credit score.

Many employers conduct background checks on job candidates, including checking their credit reports. Yet they can’t see the same information that a lender or creditor can see when they pull your credit. There may also be state laws that govern what they can do with that information.

Here are some things you should know about employer credit checks.

REASONS WHY SOME EMPLOYERS CHECK YOUR CREDIT

Credit checks are most common in jobs requiring security clearances or sensitive job responsibilities such as access to money, consumer data, or confidential information. Certain employers may run credit checks on potential employees for one of the following reasons:

• You might have difficulty managing your agreements responsibly if you have several late payments on your credit report.
• You might be financially compromised if you use too much of your available credit or have too much debt.
• Personal financial difficulties might indicate you aren’t a good fit for a job that involves managing money, like an accountant or chief financial officer.

EMPLOYER CREDIT CHECKS – ARE THEY LEGAL?

Employer credit checks are illegal in some states. They can only be performed in certain circumstances. It may even be illegal for an employer to reject you based on information in your credit report, since some states limit employers’ ability to use credit reports for hiring decisions.

Additionally, some cities have enacted laws regarding employer credit checks. When a potential employer requests a credit check in the hiring process, you should check the employer’s state and local restrictions.

Legality of employer credit checks may also depend on the type of employer. Federal, state, and local government agencies aren’t always subject to the same rules as private employers.

WHAT DO EMPLOYERS SEE WHEN THEY CHECK YOUR CREDIT?

A limited version of your credit report is seen by employers who check your credit. It can include personally identifiable information that verifies your identity like your name and Social Security number. Your birth date will not be included. It may also contain information about your loans and debts, including payment history and collections.

Your credit score is not visible to employers. While they receive your report, they don’t see your three-digit credit score number. Unlike hard inquiries resulting from credit applications, employer credit checks are considered soft inquiries and do not affect credit scores.

WHAT ARE YOUR RIGHTS?

No matter where you or your new employer are located, there are certain rights you have regarding employment credit checks.

• If an employer plans to check your credit, they must obtain your written consent.
• Employers who plan to turn you down for a job based on information in your credit report must give you a “pre-adverse action notice” with a copy of the credit report they used.
• The employer must give you a reasonable amount of time (generally three to five business days) to respond to the items in your credit report that are affecting your job application and dispute inaccurate information with the credit bureaus.
• They must follow up on your job application rejection with a “post-adverse action notice.” It includes the name of the credit bureau, its contact information, and explain your right to get a copy of your report within 60 days.

Remember that in states where credit checks are fully legal, employers may be able to make them a condition of employment. However, you must still provide permission for the credit check to be conducted. A credit check can’t be run without your knowledge or consent.

Use a credit report monitoring service to know what’s on your credit report. In this way, you can stay on top of any changes to your credit report or scores, as well as possible suspicious activity.

Is your personal information on the dark web? Make sure your identity isn’t at risk!