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Credit Reports and Employment: What You Should Know

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Given the rules of your state, your future employer may or may not be able to check your credit report and decide on your candidature accordingly. While experts agree that a bad credit report does not indicate a bad job performance, the practice is still followed by employers much the same way as doing a background/criminal check.

Given the rules of your state, your future employer may or may not be able to check your credit report and decide on your candidature accordingly. While experts agree that a bad credit report does not indicate a bad job performance, the practice is still followed by employers much the same way as doing a background/criminal check.

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(Photo Credit: ToGa Wanderings/Flickr)

Here are a few facts about the credit check process for employment that you should know.

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1. Some states prohibit employers from pulling credit reports.

The states of California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington have passed laws prohibiting employers from pulling credit reports or limiting how the reports may be used in making hiring decisions, with the exception for a few jobs, for example, jobs at the state department of justice, jobs with access to financial or personal data, etc. Please contact your state department of labor for more information on the topic.

2. Employers cannot get your credit report without your explicit consent.

You need to consent the pulling of your report. According to the federal Fair Credit Reporting Act (FCRA), you should also be given sufficient notice and explanation if the report will adversely affect your candidature.

3. Employers will not get to know your credit score.

Credit score is the three-digit number that indicates your credit worthiness to lenders. That number is of little use to your future employer. As John Ulzheimer, credit expert at CreditSesame.com tells Business Insider, “In my 23-plus years in the credit industry, there has never been a verified example of this (potential employer checking credit score) happening.”

4. The credit check process for employment will not hurt your credit score.

The report that the employers get is different from the ones lenders get. Credit bureaus have a different product for employment screening purposes.

“A lot of the data is the same, but not everything (compared to the report pulled by a lender),” Ulzheimer explains. “For instance, your date of birth isn’t on it. Plus, when an employer screens your report, not only does the inquiry have no effect at all on your credit score, but you, the consumer, are the only person able to see that it ever happened.”

5. Employers must give you the opportunity explain/challenge entries in your report

If the reason for rejecting your candidature is your credit report, then the employers must give you a chance to explain or dispute the report, because let’s face it, at least one in four credit reports have wrong information.

Because you have access to your own reports through Annualcreditreport.com, you can stay on top of any discrepancies and/or prepare an explanation for possible concerns that may come up from the report.

Tell Us What You Think

Did you go through an employment screening process in which your credit report was accessed? We want to hear from you! Leave a comment or join the discussion on Twitter.

Padmaja Ganeshan Singh
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