Gone are the days when credit checks were used solely to secure mortgages and car loans. As a US recruiting agency, we see them being used more and more by employers to determine a candidate’s level of responsibility and financial management skills.
In fact, according to a 2010 poll conducted by the Society for Human Resources Management (SHRM), approximately 47% of its members ran credit checks on select job candidates, while 13% ran checks on all candidates.
So with the likelihood of credit checks increasing, here is some information you need to know if a current or future employer asks to run one on you:
Employers need your permission.
Employers can run credit checks, but only with your written permission, as prescribed under the Fair Credit Reporting Act (FCRA).
Employers don’t see everything.
To prevent identity theft, employers don’t see all the same information as a creditor would see. For instance, there aren’t bank account numbers listed. However, they do see negative reports, like late payments and accounts in collection.
Understand your rights.
Employers are prohibited by law (Title 11 of the US Code) from discriminating against job candidates who have filed for bankruptcy. That said, other issues – such as a high debt to income ratio and repossession of cars or other goods – can certainly be a big red flag for employers.
Also, if you are denied employment because of details from your credit report, then by law the employer has five days to notify you. If that’s the case, then you also have the right to see the credit report (for free) on which the decision was based.
Review your credit regularly.
You may think you’ve got great credit, only to find out there’s actually a black mark on your credit history. Don’t let a prospective employer be the one to find it. Check your credit report regularly (you are entitled to one free credit report per year from one of the three major credit reporting bureaus) and deal with any inaccuracies immediately. If you have a problem getting an inaccuracy removed from your credit history, then consult an attorney.
Be honest with the employer.
If you’re asked to sign a consent form allowing an employer to run a credit check, ask why and how the information will be used. If you know your credit isn’t great, then it might pay to be upfront about it. By showing that you’re honest and forthcoming, you can perhaps overcome a bad credit report.