If you’re on the hunt for a new job, some employers may require a credit check for employment. Employers often request this information to gain insight into potential company risks—like the possibility for theft or fraud by new hires.
If an employer asks for a pre-employment credit check, knowing what to expect and what your rights are can help you navigate the process.
Why do employers check credit?
Unlike a credit check to verify creditworthiness before securing a loan or credit card, pre-employment credit checks are designed to help employers reduce business risks. For example, pre-employment credit checks are more common in financial services where there is a higher potential for fraud. Managerial and executive positions often involve money management duties. And law enforcement workers often handle sensitive information from private citizens.
Occasionally, employers also run pre-employment credit checks to get a feel for how an employee has handled past responsibilities outside of the workplace.
How common is it?
About 95% of employers conduct some form of background check, according to the National Association of Professional Background Screeners, (page 4) but only 16% screen every potential new hire for credit or financial problems (page 10).
It also depends on where you’re applying for work. While federal law allows for pre-employment credit checks, some states — like Connecticut, Oregon, and Washington — prohibit, or severely limit, what an employer can check. Some cities also impose bans. New York City, for example, only allows pre-employment credit checks for law-enforcement or high-level executive jobs.
Check with your state’s labor office or your city government to find out whether the law permits credit checks for employment.
What kind of information can an employer see?
One of the most important things to understand is that employers do not see the same information as a lender. Employers do not have access to your credit score, the three-digit number that takes multiple factors into account to capture your creditworthiness.
To prevent employers from using your age or other factors to discriminate, pre-employment credit checks also do not include your date of birth or marital status. A pre-employment credit check details your payment history and lists your current debts, including your mortgage, student loans, and credit cards.
What are my legal rights?
Employers must ask for your permission — in writing — before completing a background check, according to the Equal Employment Opportunity Commission. You are not required to grant permission, but if you don’t, an employer may decide not to hire you.
If an employer is considering an “adverse action,” such as not hiring you because of a poor credit history, it must notify you in advance and provide a copy of the information it is using to make the decision.
You have a right to dispute the accuracy or completeness of any information in your report and to get an additional free report from the company that supplied the credit or other background information if you ask for it within 60 days.
Is there anything I can do to make sure it looks good?
Don’t let worries about a credit check for employment keep you up at night. Employers will weigh many factors, including your skills, in deciding whether to hire you. You can also look at preparing for a credit check like preparing for an interview, you can do your research ahead of time to head off problems.
Start by requesting your free credit report. Review it for accuracy and correct any errors. Pay your bills on time, and if you have significant amounts of debt, work your way through our primer to rebuild your credit.