Can Your Credit History Affect Your Employment?
Yes. Many employers conduct background checks on all their employees, but some employers also conduct credit checks. Jobs in finance, government and other public service jobs generally generate a credit check from an employer. If your credit check is compromised, you may not be hired based on missed payments or bankruptcies which can signal you may be irresponsible.
An employer cannot check your credit without your knowledge though and will need to obtain written permission from you first. You have the right to say no to an employer credit check but be aware that the employer has the legal right to stop the application process. If you are up for a promotion, the employer can request a credit report even if you are currently employed. You still have the right to refuse but, it could affect the promotion.
Each state has its own law regarding credit checks. If you are denied the job due to your report the employer must tell you before the decision is made. They must send you a notice and include a copy of the report used and a summary of your rights. You will have the right to explain the red flags or negative information and fix any mistakes. The employer must follow up with a post-adverse action notice and give you the name of the credit agency which will allow you to get a free copy of the report within 60 days.
Why would an employer look at your credit?
They may determine you are not organized or responsible if there are late payments. The employer may also assume there could be theft or fraud if they see that all available credit has been maxed out and the employee has a history of mishandling their own finances especially if the job they are applying for involves money or consumer information. Jobs that require security clearance, access to money, sensitive customer date or confidential company information will have credit checks done.
What do they see?
They will see a modified version of your credit report specifically for employers. It will not show everything that a lender can see. It will not show your birth year or marital status, credit score or account numbers but it will show your payment record, amount you owe and available credit. The request will show as a soft inquiry on your credit, so it will not affect your credit score like an application will.
To prepare for a credit check be proactive and check your credit report. You do not have to pay or subscribe to a service to see your credit report: Request your free copy at AnnualCreditReport.com. Fix any errors in advance of a credit check. Keep your finances in good condition by paying bills on time since payment history has the single biggest influence on credit scores. Use your available credit carefully and try not to exceed 30% of your available credit on any cards you hold. Keeping balances lower is better since this is the second biggest influence on scores.
Monitor your credit report regularly and watch for negative marks so you can correct them. Credit Karma has a Credit monitoring option to ensure that no unexpected changes happen without your knowledge.
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