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What employers are looking for when they check credit -- and What They See
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The Reasons Employers Check Credit- and What They See
A credit check for employment does not show your score, just an updated credit report that includes the payment and debt history.
By Our Nerdwallet contributors are specialists in their fields and have a range of backgrounds in journalism, finance, and consulting. Our editorial standards are the most stringent standards of editorial to ensure that our readers have the information needed to make sound financial decisions without trepidation. Find out more about the services we offer.
Updated Dec. 2 2022
Editor: Kathy Hinson Lead Assigning Editor Personal finances, credit scoring debt and money management Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years working at The Oregonian in Portland in positions such as copy desk chief and team leader for design and editing. Prior experience includes news and copy editing for many Southern California newspapers, including the Los Angeles Times. She received a bachelor's degree in mass communication and journalism in the University of Iowa.
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Employers may check their credit report to determine the background of a potential hire, including indicators of financial difficulty that could suggest a possibility of fraud or theft. They don't get your credit score, but instead see an altered version of your credit report.
Credit checks by employers are more likely for jobs that involve the need for a security clearance or access to money, sensitive consumer data or confidential company data. They may also be done by your current employer before the start of a promotion.
This is what you should be aware of about your employer , including what details prospective employers may look at, what rights you have and the reasons why this procedure is controversial, and how to present your best face.
Find out how your credit is assessed
Check your score for free and the factors that impact it, as well as tips on how to keep building.
Why would an employer take a look at your credit report?
An applicant's credit history could indicate potential issues which employers want to stay clear of:
A lot of late payments may indicate you're not very organized and accountable, or fail to live up to agreements.
A large amount of credit or having a high amount of debt can indicate financial stress, which could be considered to increase the risk of fraud or theft.
Any evidence of mishandling your personal finances may indicate a poor fit for a job that involves managing company finances or information about consumers.
The Professional Background Screeners and HR.com's study of the human resources professionals in 2021 discovered that financial or credit checks are the most common part of background checks for employers in the U.S. [0* HR Research Institute . .
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What do employers see when they check your credit?
Potential employers see a modified copy of the credit report says Rod Griffin, senior director of public education and advocacy for Experian.
Here's what employers will see:
Identifying information like you full name, address.
Your credit accounts and your credit limit.
Your payment history.
The details of your employment or work history that you have self-reported on credit applications.
Bankruptcies or liens.
Here's what employers won't see:
Your .
Account numbers appear on your credit account.
Your income.
Medical charges.
Any identifiable information that could use to make you a target for discrimination, including your birth year, marital status, race and ethnicity.
Does an employer credit check hurt your score?
Companies can obtain the credit reports of their employers from one of the three major credit report bureaus which include Equifax, Experian and TransUnion -- or may choose to use a special screening company.
The credit check is considered a on your credit therefore it won't remove points off your credit score as a credit card application might.
The credit report also won't display other soft inquiries about your credit report, which means prospective employers won't be able to find out if any other employers have checked on your credit. However, you'll be able to view the soft inquiries if you want to request your own credit report.
What are your legal rights?
Notification and authorization A company must inform you in advance if they intend to check your credit and obtain your written permission. The Fair Credit Reporting Act requires the notice to be "clear and conspicuous" as well as not become mixed in with any other language.
Warn before being rejected A warning before rejection: If an employer may decide to reject you based on a portion or completely on your credit score the company must inform you in advance before the decision is taken. It has to send you an "pre-adverse action notice," including a copy of the report used and a summary of your rights.
Time to respond The company must allow an appropriate time generally three to five business daysbefore proceeding. The objective is to help you clarify the red flags on the report or, if the negative information is incorrect, let you fix the mistakes with the reporting company.
Notice of finality, the right to a free copy: Once it has acted and the company is required to follow up with a post-adverse-action notice that includes the name of the credit reporting agency, its contact information and describing your rights to receive a free copy of the report within 60 days.
The controversy surrounding credit checks by employers
Certain states have restricted the use of employer credit checks, which includes California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington.
Those who object to employer credit checks say that a worker's credit report is not a factor in their ability to complete the majority of jobs. Moreover, critics say the practice harms workers -particularly job seekers from minority groups -- because it can cause a problem on the path to stability in the economy.
"There are significant racial disparities in the history of credit and credit score," says Chi Chi Wu an attorney on staff of the National Consumer Law Center. "Studies show that Black as well as Latino consumers have lower scores on their credit as a whole," she notes, citing reasons like the racial wealth gap as well as other types of discrimination that makes debt harder to pay off and more difficult to accumulate.
"So, when you use credit history when you apply for jobs (background checks), you are sort of adding that disparity in racial status into your decision process for applicants," Wu says.
Those in favor say that credit checks offer employers insights into a job candidate's judgment and decisions that could impact their business in the future.
You can check with your local government to find out if employer credit checks are not allowed in your particular area.
What can you do to prepare for an upcoming credit check?
Checking your own credit proactively allows you to see what your employer would doand possibly correct any incorrect negative marks prior to.
You're entitled at least an unrestricted credit file each week from any of the three bureaus by . If you find any errors, get them corrected by an .
Once you've completed that, keeping your credit report clean is a smart financial move and will help protect your credit score too. Here's how:
Make sure you pay all bills promptly. Paying history is the single biggest influence on your credit scores So making timely payments helps your scores while also keeping delinquent marks off your credit report.
Utilize credit cards with a light touch. The experts advise against using credit use any credit card at any time -- and lower is better. It shows you're not strained financially and also helps your score since credit use has the second-biggest influence on them.
Check your credit report frequently. Some personal finance websites, such as NerdWallet offers a credit score you can view at any time you'd like, giving you a way to regularly watch for negative marks.
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