Your Credit and Your Career: Employment Credit Checks

Your credit can affect a wide variety of things, ranging from loan approvals to being approved for a credit card. However, depending on the state you live in and what you do for work, your credit can also affect you landing a job or promotion. It is possible for employers, albeit with limitations, to run a credit check as part of a background check when vetting a potential employee.

What information can an employer see in an employment credit check?

There are three important credit terms that everyone should know. Your credit history refers to how you have previously conducted yourself as a borrower, and potential lenders and other parties use your credit history to judge your trustworthiness. Your credit reports are records of your financial history that contain information (both positive and negative) regarding your credit accounts and your behavior. Finally, a credit score is a numerical value that indicates how reliable or risky you are as a borrower based on information in your credit reports.

In terms of your career, your credit history can affect landing a job. In many states, employers are able to request modified versions of your credit reports from the credit bureaus when vetting you for a job, or even a promotion. Employment credit reports include identifying information, such as your name, address, Social Security Number (SSN), and previous addresses. More importantly to employers, these reports show your payment history of debts such as credit card debts, car loans, mortgages and student loans, including late payments. These modified credit reports will not show your credit scores, account information, or information that could breach equal employment regulations such as your birth date or your marital status.

What kind of information can flag a warning to an employer?

Your incurred debts and payment history can give employers an insight into your level of responsibility and financial maturity. This information can highlight warnings to potential employers, and ultimately impact your chances of landing a job or promotion. For example:

• If a potential employee appears unable to properly manage their own finances, this may indicate that they could be unsuitable for a position in which they’re required to manage money, confidential data, or sensitive information.
• Maxing out your credit cards or recent late fees might indicate to employers you’re unable to budget.
• Delinquencies such as liens can indicate irresponsibility, suggesting you could not pay off your debt in a timely fashion or you are unable to successfully negotiate.

Credit checks for candidates are not particularly usual, but they are more likely for positions that involve security clearance, access to funds, sensitive data or confidential information. For example, applying for a financial sector job such as accounting and banking will more likely involve a credit check, as it will involve the candidate access confidential information and dealing with money.

Regulations relating to employer credit checks

The Fair Credit Reporting Act (FCRA) is a piece of federal legislation that regulates consumer reporting agencies and promotes fairness, accuracy, and privacy of consumer information collected in such agencies’ files. The FCRA regulates how employers can ask for, receive and use background check information from third parties, including the credit bureaus. Prior to an employer conducting a credit check on you, there are several things they must notify you and get your written approval. If you do not consent, the employer can reject your application. If the information on your employment credit report is used to reject your application, the employer must let you know. They must also let you know the contact information of the credit bureau which provided them the employment credit report and information on your right to dispute the report.

Prior to applying for a job, it is recommended that you request copies of your credit reports from the major credit bureaus and scan them for inaccuracies. If you find any errors, you can dispute them with the specific credit bureau.

Many states also have their own laws surrounding how employers can use consumer reports. To find out more on your state’s laws on the topic, consult your state’s Department of Labor.

Conclusion

The best way to prepare for an employment credit check is to be proactive about your credit. Regularly monitor your credit reports and focus on being financially responsible. If you are someone who wants to start building credit, there are several ways to do so, including responsible credit card use, credit builder loans, and becoming an authorized user on a family member or friend’s card. However, it needs to be understood that building great credit takes both time and responsibility. Ideally, you should start instilling good long-term habits regarding credit and your financial health, such as paying your loan and credit card bills in full and on time and keeping your credit card balances low.

Oliver Browne is a Credit Industry Analyst at Credit Card Insider.