Employers use pre-employment credit checks to measure your ability to handle money responsibly and to get a sense of your overall reliability. In some regulated financial industries, and in fiscal roles requiring state or federal licensing, pre-hiring credit checks are required by law. IE: stockbrokers, mortgage brokers, pawnbrokers and payday lenders.
When it is not required by law, job candidates may be subject to credit checks based on the hiring company’s policies. Candidates are typically subject to credit checks for management jobs with large financial responsibility and other positions that require handling large sums such as cashiers and bank tellers. A candidate who appears overwhelmed with debt, has accounts in collections or has recent bankruptcies could give employers a second thought about hiring you for financially sensitive jobs.
What Information Do Employers See When Checking Your Credit Report?
Employment credit checks can reveal a number of personal details that help verify a job applicant’s identity and credentials, including:
- Full legal name (including past names that may have changed following marriage or divorce) under which they applied for or received credit
- Past and current addresses
- Past and current employers in some cases
Pre-employment credit check also reveals credit-related information, including:
- A record of credit accounts and payment history
- Debt Ratio—the candidate’s outstanding debt as a percentage of their available credit
- Past and current bankruptcies
- Unpaid bills turned over to a collection agency
- Other credit inquiries
How Far Back Do Employers Look?
Like credit checks related to loan and credit card applications, pre-employment credit checks are subject to the federal Fair Credit Reporting Act (FCRA). Under the FCRA, pre-employment credit checks can consider no more than seven years of credit history, unless the job commands a salary of $75,000 or more, in which case up to 10 years of financial history can be reported. In addition, the FCRA allows bankruptcies to be reported for up to 10 years, no matter what the job in question pays. The FCRA requires anyone running a credit check on you, including a prospective employer, to notify you in writing and get your written consent before doing so. (But if you deny permission, the employer may withdraw its job offer.)
An employer who has checked your credit must also give you a chance to respond to any negative findings. If the results of your credit check are the reason an employer declines to hire you, the company must tell you so in writing. Some states have additional laws that forbid or limit use of credit checks in the hiring process. These include California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington, as well as cities including Chicago, New York and Philadelphia. For more information on rules governing pre-employment credit checks where you live, consult your state’s labor department.
Does an Employer Credit Check Affect Your Credit?
A pre-employment credit check will generate a soft inquiry entry on your credit report, comparable to one that appears when you check your own credit score. Unlike a hard inquiry, which is associated with a new loan or credit application, an employer credit check will not affect your credit scores.
The Bottom Line
If you are concerned about what a potential employer will see if they perform a credit check on you, contacting Credit Services of America ahead of time and take advantage of our consultation we can give you an idea of what to expect by getting a copy of your credit report and going over it with you. If your report contains a few negative entries, or even more serious issues, we can assist you with credit repair, tradelines, debt settlement and/or student loan consolidation. We can help you prepare to address them before they come up during the hiring process.