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What Do Employers Look For in a Credit Check
20 Dec 2019

What Do Employers Look For in a Credit Check?

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Are you in the market for a new job? Sending resumes and hoping to land that interview. You’ve prepared the perfect polished resume and cover letter that will make you stand out from the pack.

You are feeling confident and like there’s nothing that will stand between you and landing that dream job. Except there might be something that you haven’t thought of yet. According to the National Association of Professional Background Screeners (NAPBS) a large percentage of employers will check potential candidates with a background check.

In addition to the 95% who do some kind of check, 16% will also do a credit or financial background check on a candidate before hiring them. So what do employers look for in a credit check?

Read on to learn all about credit checks done by employers and how it can impact you as a potential employee.

What Do Employers Look For In a Credit Check?

Employers who choose to run a credit check on you as a potential employee hope to get a broader picture of you. How you handle your own money and financial responsibilities helps to create a picture of you as a person. It might also tell them how you might act as an employee.

If you are going to be handling money in their company, they want to calculate what your background is with money. Consider more closely some reasons they might run a credit check:

  • Employers want to see if you have an excessive number of late payments to your creditors. This shows a lack of organization and responsibility and that maybe you don’t always fulfill your responsibilities.
  • They will check to see how much credit you use and if you have an excessive amount of debt. Again, this might be an indicator of your responsibility level.
  • Credit reports show how you handle money. It could show a pattern of your management of money. They want to know if you handle their money, will you do it the same way.

If have a significantly large amount of debt, are you a theft risk as you try to manage all your bills.

Who Gets a Credit Check?

Not all employees are subject to a credit check. So, how will you know if you might have a credit check done by a potential employer?

And why do employers check credit?

  • Employers who want an employee to have a security clearance will do a credit check as part of the security clearance background check.
  • If in the course of working for an employer you will be handling money for them, they might want to do a credit check.
  • Employees who handle sensitive data or records of customers’ financial information might also be subject to a credit check before hiring.

Employers might also ask a current employee who is being given a promotion to provide a credit check. This would be especially true if your role was changing and you would be more involved with company finances.

What Do Employers See When They Check Your Credit?

The employer will not see what you see when you run a credit report. They get a modified version that only shows certain information.

The credit report cannot show anything that might be illegal for them in regard to equal employment regulations. For example, they cannot find out your marital status or birth year from the credit report. They will not get account numbers for any creditor you have.

What can they see then? They will see a payment history of how you pay on your debt. They will see how much debt you carry and how much available credit you have.

What Must The Employer Do To Look At Your Credit?

An employer cannot just run a credit history on you without you knowing. In fact, there are very strict guidelines in how they must handle doing a credit check.

The Fair Credit Reporting Act requires employers to get written permission from you to run a credit check from you. There are many cities and states across the country that prohibit credit checks in the hiring process. Your own state’s labor department could provide specifics.

If an employer plans to not offer a job because of the information they saw in the credit report, they must also tell you in advance. The employer must provide a copy of the report and information about your rights in that situation. The employer must also give you time to respond before making the final decision.

If they go ahead after you have had time to respond then they must also offer information about the credit agency reporting and how you can access a free credit report from that agency.

How Does Their Credit Check Impact You?

The credit report that is obtained by a potential employer should not have any impact on your overall credit score.

The employer might get the report from a private agency that does the checking or from the three major credit agencies, Equifax, Experian, and TransUnion. The report they see if considered a “soft inquiry.” It does not impact your credit score like opening a new credit card, for example.

One piece of good news is that is also will not show when other “soft inquiries” have been done. So, if you are interviewing with more than one company and the others have also done checks, they will not show up.

How Can You Be Prepared For Them to Look At Your Credit?

You want to be prepared for what a creditor will see when they look at your credit history. You should regularly check your own credit report.

If you are behind on any payments, you want to work to get them current. You also want to try to avoid using available credit. It looks good if you have unused available credit.

You want your credit report to show a picture of a person who is fiscally responsible with money.

Employee Credit Checks With Potential Employers

Finding a new job is hard work. It is important to know everything a potential employer might consider in the hiring process. You have a polished resume and you have prepared for the interviews. Knowing what do employers look for in a credit check is one more part of being prepared to be hired for that dream job.

Want to learn more ways to handle your money well? Check out our blog for a plethora of information related to you and finances.