What to do if an employer wants to check your credit

It's fairly common for a boss to check a potential employee's financial situation. Here's how to be prepared.

By Credit.com Mar 20, 2014 12:10PM
This post comes from Abby Hayes at partner site Credit.com.

Credit.com on MSN MoneyIf you’re in the market for a job, you may be aware that some employers run credit checks  before they decide to hire an employee.


Businessman © Digital Vision/SuperStockThe idea behind this credit check is that employees who are financially responsible will also be responsible at work, and that those who are in financial straits may be more likely to steal or make other bad choices.


Whether or not this is actually the case (and a few studies show that it generally isn’t), running credit checks on job applicants is actually a fairly common practice. Here’s what you need to know about them.


There are credit reports that are designed specifically for potential employers to use. They contain much of the information that is found in credit reports pulled by potential lenders, except they do not show your account numbers, date of birth, or references to your spouse. Your credit score is also not included in these reports.


The reports will contain basic personal information (like your home address), other names you’ve used (like your maiden name), information on public records like bankruptcies or liens, and your credit history. These reports also include work history and basic employment information.


Also, employment credit checks are a soft pull on your credit, meaning they won’t affect your credit scores.


You’ll know if they pull your report

A potential employer cannot legally pull your credit report without your permission.

So, you’ll definitely know whether an employment credit check could happen. You’ll have to sign a release form to give the employer access to your information. And, encouragingly, employers usually only run employment credit checks on the most viable job candidates because these credit checks cost the employer money.


This isn’t true of all employers. Some will run employment credit checks as part of first-round screenings. But they still have to get your permission. However, denying an employer access to your report may put you out of the running for a job.


If you signed a release for an employment credit check, but you know that there are errors in your report, know that you may not be able to correct those errors before the employer pulls your report. It may take weeks or even months to fix.


How you can pre-empt problems

Here’s where being proactive can work in your favor. First, before you begin your job search, it’s good to pull your credit reports to look for errors (and get to work on correcting them) and identify negative items.  You're entitled to your credit reports for free every year from the three major credit reporting agencies.


That way, you can be ready to pre-empt any potential issues by being upfront with the interviewer about your recent credit history. This tactic can help paint you as an honest, forthcoming person. Plus, you can actively explain credit problems an employer might see, so that you get a chance to tell your side of the story instead of being dismissed out of hand.


So if you sign a form that gives an employer permission to pull your credit report and you know that there are problems in your credit file, open up -- talk to the interviewer about why you went through foreclosure, or why you’re buried in credit card debt. Better yet, be straightforward about how you’re actively working to fix those problems.


You don’t need to tell your life story here. But giving an overview that basically says, "Look, I’ve had some financial problems. Here’s why. Here’s what I’m doing to fix them," may give you a better chance at that job.


(Editor’s note: Throughout your job search, it can be helpful to monitor your credit scores, which you can do using a free tool like Credit.com's Credit Report Card. While employers do not receive your credit score with employment credit reports, your credit score can be a good reference tool for yourself as you work to build or maintain your credit.  If you see an unexpected drop in your scores, it’s important to check your credit reports for errors or even signs of fraud.)


More from Credit.com:


VIDEO ON MSN MONEY

7Comments
Mar 20, 2014 3:21PM
avatar

Glad I'm retired.

I guess some poor bastard whose credit is shot because he was laid off doesn't have a chance at getting a job. I would think it would be more important to keep schools from hiring child molesters. That screening hasn't gone too well lately.

Most people's jobs don't even involve handling money. What are they going to steal ? Office supplies ? Just one more invasion of privacy and "guilty until proven innocent". You sheep are well on your way to getting the world you deserve.

Mar 20, 2014 3:53PM
avatar
I just don't see this practice as a good indicator of a potential employee's character or trustworthiness. Hard times hit everyone at some point. Not everyone who's financially underwater is irresponsible and/or a crook. The only time I believe a credit check is justified is when someone is applying for a job in any financial services field.
Mar 21, 2014 9:41AM
avatar

I think companies want to not hire on "facts" of some sort when in reality they don't want to hire someone because they are old, fat, female, male, wrong race, wrong religion, wrong town, etc.  so they use the CREDIT report as the reason they don't pick someone. 

 

it's been slowly accepted by companies, so their arguments could stand up in court ~ using the CREDIT report ~ and not even bring up their real reasons for rejecting an applicant. 

Mar 21, 2014 9:22AM
avatar
If you are going to be doing accounting, signing checks, writing checks, etc than do a credit check but other than that "no".  Things happen and people could have superior credit and all of a sudden it goes bad.  To those companies go to your gut feelings and you should do OK.
Mar 21, 2014 9:12AM
avatar
Too Big To Fail, Too Big to Jail now wants everyone else to pass some FAKE/Bogus Credit check for any Job. Figures. Congress just voted 51 times to repeal the ACA, how about voting just once on stopping all these Bogus uses of farce Credit Scores.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.