Job hunting can be a strenuous endeavor, not to mention humbling. It leaves you open to
scrutiny and makes you feel vulnerable even if you have nothing to hide. For some, the act of
looking for employment opportunities can be a soul-crushing experience.
Regular background checks, while annoying, are at best tolerable. But when a prospective
employer starts asking if they can check your credit score? That’s where things become
a little contentious.
Companies can request an employer credit report from one of three major credit bureaus —
Equifax, Experian and TransUnion. The use of credit reports in screening job applicants has
been a popular trend among employers for decades, though it’s not without its fair share of
controversies and legal disputes.
Why an employer would be interested in looking at your credit
Just like with landlords, can we blame employers for wanting to do credit checks? After
all, it’s in their best interest to ensure that who they are hiring is trustworthy and financially-
responsible enough to be deserving of the coveted position. Even more so if the job involves the
handling of private information and valuable assets.
If the job involves having access to company funds, for instance, it’s highly unlikely that a
company will give it to the candidate who has a delinquent credit record, since it could be a red
flag indicating the likelihood of theft or fraud. Moreover, late payments give the impression that
an applicant is not very organized, and thus highly unlikely to honor agreements.
You might be asking, “What are they going to find in my credit report?” and “Can they do that?”
Let’s explore these questions below.
What potential employers see when doing a credit check
Experian’s director for public education Rob Griffin said that what potential employers will be
receiving is a modified version of your credit report. In accordance with equal employment
regulations, this modified version doesn’t disclose your credit score, account numbers, and
personal information such as birth year or marital status.
To put it simply, what potential employers can learn from the modified credit report is how much
credit you have, how many credit accounts you have, and whether you’re making payments on
time.
Legal issues with credit checks
Under the Fair Credit Reporting Act (FCRA), employers can’t get access to your credit
information without your written consent. So it goes without saying that an employer has to
notify you first before they can get your written permission. This situation, curiously, presents a
conundrum, since your refusal may lead the potential employer to believe that you have
something to hide.
On top of the Fair Credit Reporting Act, 10 states have enacted regulations prohibiting credit
checks and limiting how credit information can be used in making employment decisions. To
determine if your state is covered by such laws, check with your state’s labor office or your city
government.
You’ve given the potential employer your approval… now what?
If you do decide to give the potential employer your consent to look at your credit, FDCA rules
dictate that the company must provide you a copy of the report as well as a summary of your
rights before they can turn down your application. This rule allows you to check for errors and
inconsistencies on the report, allowing you three to five business days to amend, explain, and
redress them.
If the potential employer decides to reject your application on account of your credit report, it
has to submit a post-adverse reaction notice containing the name of the credit report agency, its
contact information, and an explanation of your right to get a free copy of the report within 60
days.
How to prepare for a credit check
In the final analysis, it’s in your best interests to ensure that your credit score is in good shape.
Not only does a good credit rating enhance your eligibility in the job market, but it also improves
your chances of taking out a loan, getting a mortgage, or buying consumer goods on a finance
scheme. In short, a top-notch credit score gives you the financial flexibility and
opportunity to live a more fulfilled life.
If you’re looking for employment opportunities and are concerned about credit checks, you can
check your credit report for free at www.annualcreditreport.com. If you find errors or
inconsistencies, we strongly advise that you clear them up as soon as possible.
More importantly, pay your bills on time and resolve any debts you may have.
