A credit check is often part of the hiring process. Employers have several reasons to check the credit of a potential hire. The main reason is to review their financial history for evidence of fraud or theft. When running a credit check, a potential employer sees a modified version of the job applicant’s credit report, which does not include a credit score. Instead, what an employer sees is the individual’s payment history.
More information on employer credit checks is provided below.
Why Do Employers Check Your Credit?
By looking at your credit history, employers consider various factors that include your:
- History of handling money: If you have a history of late payments, it could mean you’re not very responsible or organized, which could potentially reflect in your future job performance.
- Judgment and decision-making: Having too much unpaid debt may create the impression you’re not good at living up to important agreements and obligations.
- Potential for criminal behavior: Concerning behavior may suggest a candidate is at a high risk of engaging in theft or fraud. Therefore, credit history checks are most common in jobs that involve handling money, consumer information, and other types of sensitive data.
Does an Employer Credit Check Hurt Your Credit Score?
An employer credit check counts as a “soft inquiry” on your credit report. It will not hurt your credit or reduce your credit score, unlike applying for a credit card. Credit reports, obtained from the three main credit reporting bureaus (TransUnion, Equifax, and Experian) or a private screening company, won’t show other soft inquiries. Therefore, a company won’t see whether other employers have checked your credit too.
What Are Your Legal Rights?
Remember, your credit score is not visible to potential employers, so if it’s less than perfect, there’s no reason to panic. However, you have legal rights regarding employer credit checks. These include:
- Notifications: The employer must clearly notify you before they run a credit check; they must also obtain your written permission, as required by the Fair Credit Reporting Act.
- Warnings: You can be rejected due to your credit report. However, an employer must warn you in advance of its final decision with a “pre-adverse action notice”.
- Final notice: You’ll then have time to dispute any error found in the notice. The employer must then wait before proceeding; you’ll usually have three to five days to review negative information and fix mistakes.
In some states, employers are forbidden to consider credit information in hiring decisions. These include California, Connecticut, Maryland, and Illinois.
How Can You Prepare for a Credit Check from a Potential Employer?
You can be proactive in managing your credit before a potential employer checks your payment history. To start, you can now access one free credit report each week from the credit bureaus (at AnnualCreditReport.com) and dispute any errors found. The following steps can help you manage your credit and improve your credit score:
- Track your credit score regularly and watch for any negative marks.
- Pay all your bills on time, as payment history has the biggest influence on your credit score.
- Use as little available credit as possible, or ideally less than 30%.
If an employer plans to interview you about your credit history, have an explanation ready and let them know if any disputes on incorrect information have been filed.
Contact American Credit
At American Credit, we provide credit restoration and consultation services to help analyze your credit and determine how to improve your situation. Our credit repair service is available to clients throughout Los Angeles and surrounding areas. Rather than following the dispute letter process, we use a pre-litigation process to achieve a higher success rate. Contact us today to learn more and receive a free Credit Repair Consultation.