Why Employers Check Your Credit Report
According to a survey by Career Builder, just under one-third of employers who do background checks on job seekers check their credit as part of their research.
Although the Fair Credit Reporting Act stipulates that employers must obtain your written permission before they do so and cannot see your credit rating (they receive a limited version of the report that lacks information such as your date of birth and marital status) , they make some potentially unfair assumptions about you based on your message.
If you’re managing money in your potential job, employers can use your credit report to get an idea of the timeliness of your own payments. They may also use the information they find on your report to discipline or fire a current employee, according to Nolo , a legal advice website, or check your report before offering a promotion.
“Using a lot of available loans or being overly indebted are signs of financial distress and could be seen as increasing the likelihood of theft or fraud,” writes NerdWallet .
It is also used to verify your ID in cases where a clearance level is required.
There are currently 11 states restricting employers’ ability to use your credit report to make hiring decisions, including California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. Restrictions vary by state and can prevent employers from fully reviewing reports or prevent employers from pressured employees to agree to review reports.
Employer cravings won’t hurt your credit history. “Credit reports will also not show other soft requests for your loan, so potential employers won’t be able to see if other employers have verified you,” writes NerdWallet. “But you can see soft requests if you request your own credit report.”
If you are negatively affected by credit inflow
The FTC notes that if an employer is going to use a report as a reason to deny you a job, they must first provide you with:
- a notice that includes a copy of the consumer report you relied on to make your decision; and
- a copy of a summary of your rights under the Fair Credit Reporting Act
Then you are given a few days to respond to what the employer found.
“The Adverse Action Notice informs people of their rights to see the information reported about them and to correct inaccurate information,” the FTC said. You can then dispute “the accuracy or completeness of any information provided by a consumer reporting company,” and you are entitled to free familiarization with that company.
If they still intend to take “adverse action” (that is, not hire or promote you) despite your response, they should notify you.
While you do not need to give your employer permission to receive the report, if you do not live in one of the 11 states listed above, it can lower your chances of getting a job. The next time you shop in the job market, check your credit at one of the three major bureaus (or use one of the many apps that include credit information ) and try to clean up your report.