Credit check

What Really Shows Up on an Employment Credit Check

You survived the interviews. You have skillfully explained where you see yourself in five years. You managed to shine even when you spoke about your greatest weakness.

Now there’s only one thing standing between you and your dream job: a credit check.

But what happens when you have a dull credit score? Will past missteps haunt your career prospects for years to come?

What shows up on an employment credit check?

First, the good news: Employers don’t see your credit score when they manage your credit. Instead, they see an edited version of your credit report.

This is what appears:

  • Open accounts with redacted account numbers

  • Payment history

  • Outstanding balances

  • Amount of credit opened

  • Accounts in collection

  • Bankruptcies in the past 7 to 10 years, by type of bankruptcy

  • Seizures from the last seven years

Now here’s the bad news: things employers look for when checking your credit – mostly negative payment history or a top credit utilization rate – are the two main factors that can crush your credit score.

So if you have a low credit score, your credit report will likely contain information that could be a red flag for employers.

If a company checks your credit for hiring purposes, you don’t have to worry about your score being affected. The traction is what is called a smooth check, which has no impact on your score. A rigorous check, which occurs when you apply for credit, can reduce your score by a few points.

Pro tip

If your current employer wants to check your credit, they will need your written consent to do so.

When do employers do credit checks?

For many applicants, a credit check is unlikely to be an issue. A 2020 survey of more than 1,500 human resource professionals by the National Association of Professional Background Screeners (NAPBS) found that only 6% of companies perform credit checks on all employees.

Obviously, credit checks are more common for roles that involve handling money or sensitive information. If your personal finances are in trouble, employers may worry that you are more likely to embezzle money or commit fraud.

But some companies do credit checks simply because they think if you can manage your own money well, it’s a sign you’ll be a good employee — although a growing number of state and local governments are s oppose this practice. At least 11 states, Washington, DC, as well as Chicago, New York and Philadelphia, limit the use of credit checks for applicants who don’t deal with finances or sensitive data.

Employers usually perform credit checks at the end of the hiring process. Most do them after a conditional job offer has been made, although some do them after a job interview.

Under the Fair Credit Reporting Act, you must consent in writing to an employer withdrawing your credit.

What to do before a hiring manager runs your credit

If you are a job applicant and have been asked to consent to a credit check, you will want to know exactly what the employer will see on your reports.

The best way to do this is to get a free credit report from the three bureaus of AnnualCreditReport.com. Normally you are only entitled to one free report per year from each office, but due to the pandemic you may receive a free report every week until December 2022. However, it is probably not necessary to check your reports frequently.

Pro tip

Your credit reports are truly free at AnnualCreditReport.com. Unlike some sites, you don’t need to provide your credit card information for a temporary trial to get it.

If you find any information that is inaccurate, it is essential that you dispute it with the offices immediately – and let the hiring manager know that you dispute it as well.

But when the report contains negative information that is correct, the proactive approach is best. If you’ve made mistakes in the past, ask to speak to the hiring manager before they run your credit.

If your credit issues are the result of hardship, such as a death in the family, layoff, or divorce, you may want to explain the circumstances to the hiring manager, but be careful when offering TMI.

You’ll be in a better position to make your point if you can explain how you work to fix things and why your previous mishaps won’t affect your job performance.

If the employer chooses not to hire you based on what they found in your credit reports, they are required under the Fair Credit Report to let you know. They will also need to give you a copy of the credit report they used to make the decision, a summary of your rights, and enough time to challenge the decision.

Although this process may seem painful, it helps to understand the reason the employer is checking your credit: it is usually to mitigate risk. They want to make sure they’re not hiring someone who is likely to steal from the company or its customers, rather than judging you for missing a credit card payment.

Why You Should Check Your Credit Reports, Not Just Your Score

Whether you are in the labor market or not, you should regularly monitor your credit reports. And no, signing up for a credit score monitoring service is not enough.

While these services can be helpful, only reports provided by official bureaus will show you what is really causing credit problems.

Think of the credit score as your temperature. If you develop a fever, it could be a sign of an underlying problem. Getting your credit report is like doing lab work. This is the only way to get to the root of the problem.

Trust us: even if you’re not looking for a job or applying for credit anytime soon, it will pay off to fix those issues now. Finding a job is stressful enough. Don’t add unnecessary pressure down the line by neglecting to keep track of your credit report.

Robin Hartill is a Certified Financial Planner and Senior Writer at The Penny Hoarder. She writes the personal finance advice column for Dear Penny. Send your tricky money questions to AskPenny@thepennyhoarder.com.

This was originally posted on The Penny Hoarder, which helps millions of readers around the world earn and save money by sharing unique job opportunities, personal stories, giveaways and more. The Inc. 5000 ranked The Penny Hoarder as the fastest growing private media company in the United States in 2017.