Can an employer check my credit score?

Man shaking hands with a job candidate who is wondering if an employer can check credit scores. Man shaking hands with a job candidate who is wondering if an employer can check credit scores. Image:

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Applying for a job is stressful enough. Filling out an application and sitting for an interview are intense ways to put yourself out there. You might feel that everything about you is being judged: your experience, your intellect, even your appearance. After all that, the idea that you may be scrutinized based on your credit health as well might be too much to bear.

Some worry that a credit score that needs work could affect their job search. Can we add a high credit score to the list of good employee criteria? We explore that question below.

Yes and no

The short answer is no, credit bureaus do not share your credit score with employers. Subject to restrictions in state law, employers may, however, ask to see your credit report. When your information is requested, credit bureaus will send over a variation of your credit report meant specifically for employers. This means that they won’t see quite everything that a lender can see, for instance, with the biggest difference being the absence of your credit score.

Regulations on access

Access to your credit report is governed by the Fair Credit Reporting Act, which sets the limitations on when and by whom your credit information can be accessed. The FCRA sets a few restrictions specifically on employers who are using credit reports to screen new job applicants.

First, your employer must get your consent before checking your credit report, with limited exceptions. No consent, no access to your information, though it’s of course worth considering what a refusal on your part would imply to a possible employer. In addition, if the potential employer decides not to hire you based upon the report, they must provide you a copy of the report for you to review yourself before taking an adverse action (like denying you the employment opportunity). This measure is meant to protect consumers from potentially life-affecting errors on their reports, and to give the applicant a chance to address and correct those errors.

Beyond the Fair Credit Reporting Act, some state governments have also increased regulations on credit background checks by employers. As of 2013, 10 states have taken action to ban or limit employer access to credit reports, according to the National Conference of State Legislatures, and other states have legislated regulations of their own. For example, California law generally requires employers to give you the chance to obtain a free copy of the credit report they request.

What employers look for

We’ve already established that employers cannot access your credit score, so what are they looking for exactly? In most cases, the answer to why employers want to access your credit report at all is quite simple: they are looking to reduce their risk.

Many employers only look at credit reports to protect themselves against actions that violate ethical standards or criminal behavior. A history of negative public records or other derogatory marks could indicate to employers that an applicant has a record of untrustworthiness or unsavory behavior. Especially for positions that command a great deal of responsibility, like government work or medical jobs, or for jobs that require access to company funds, employers may be on the lookout for these sorts of negative indications.

Beyond the signs of illegal activity, your credit report can also tip off employers to a general lack of responsibility. A credit report completely free from late payments and derogatory marks can indicate to an employer that you have the financial maturity and general responsibility it takes to handle the position in question.

Things you can do

While having a credit check as part of your job application may feel like a tension-filled cherry on top of your stress-soaked sundae, it’s not all doom and gloom.

Besides growing regulation that limits this practice, credit checks also seem to be declining in popularity amongst employers themselves. The Society of Human Resource Management, for one, reports that credit checks are becoming a “disfavored tool” for employers and suggests that, due to regulation and decreasing interest, this type of background check “could potentially disappear from the hiring landscape.”

The other bright side is that you aren’t helpless in this equation. If you’re planning on entering the job hunt, enroll in credit monitoring to ensure that no unexpected changes slip by and look over your credit report to make sure you have a handle on what’s being reported now. Just like every other aspect of the application process, make sure you come in prepared, anticipate any possible problems before they happen and reap the rewards of your financial responsibility.