What is an Employment Credit Check?

Credit report form on a desk
••• courtneyk / Getty Images

When you are applying for jobs, you will make sure your resume and cover letter are well written, up to date, and targeted to show that you are the best candidate for the job. When you are going to an interview, you’ll do thorough research on the company and review and practice typical interview questions. One thing you may not think to prepare for though, is an employment credit check.

Employers are increasingly running credit checks on job applicants and using that information to make hiring decisions.

  A Society of Human Resources Management (SHRM) survey reported that 60% of employers get credit reports on applicants for some or all positions.

Most often, credit checks are used for applicants to jobs that deal with money. Bank, accounting, and positions where confidentiality is important are the types of employers who may seek credit verification on their potential employees.

What is Included in an Employment Credit Check

An employment credit report includes identifying information, including your name, address, previous names and addresses, and social security number. It also shows the debt you have incurred including credit card debt, mortgage and car payments, student and other loans, and your payment history- including late payments.

The Employer Must Ask Your Permission

Before an employer can get information for employment purposes, the Fair Credit Reporting Act (FCRA) requires that they must notify you in writing and get your written authorization.

If the employer is simply conducting inquiries (rather than running reports) they should also ask for your consent.

If you do not consent to the credit check, employers might go forward with the interview process, but they may also reject your application on the spot. Furthermore, federal law allows employers to use these reports as a reason for choosing other candidates.

  Some states are proposing legislation to ban some employment-related credit checks, but to date no laws have been enacted.

If you know that a credit check is going to turn up some questionable issues, it’s a good idea to address them up front. When the employer asks your permission to run the check, you should explain as succinctly and honestly as possible what they may find, and what you have done to rectify the situation. Particularly if you went through a period of unemployment, or some other financial hardship- which so many of us have- the hiring manager may be able to make a case for offering you a job despite what they find in your past.

Laws Restricting Credit Checks

Currently, it is legal under federal law for potential employers to conduct credit checks. The Fair Credit Reporting Act legally allows employers to check credit reports on both potential candidates and current employees. Employers are required to send a copy of the credit report and written summary to the applicant and to wait a few days for his or her rebuttal or explanation regarding the findings.

Some states have laws which restrict or prohibit credit checks. There are also local laws which prohibit job applicant credit checks.

Check with the Department of Labor in your location if you have a concern about bad credit impacting your hireability.

More Checks Conducted by Employers