Do Employers Check Credit History? | Build

Do Employers Check Credit History?

August 1, 2022

We are all familiar with how the basic employment process works. You submit your resume for consideration and hopefully receive an invitation for an interview. Bad credit is not something you’d factor into your chances of being offered the job. But, think again. Most of us would expect the job offer to be contingent upon a background check and likely a drug test. But did you know that a pre employment credit check could also affect whether or not you’d receive that offer? If you are applying for a job in a particular industry or with a specific company, your personal financial history could significantly impact your career opportunities.

Our credit report isn’t something we consider when making career choices. That’s always been something we concerned ourselves with when it came to applying for a loan, not a job. So, when did credit checks for employment become a thing? Why would a prospective employer consider your personal financial information pertinent in deciding if you are a good fit for the job? Knowing the answers to these questions can help you get in the correct position to apply for the jobs you want without fearing bad credit and an employment background check derailing your career goals. 

Credit Check vs. Background Check: What’s The Difference?

There are several key differences between a credit history check and a background check. This is the first thing you need to understand when preparing for a pre-employment credit check as a condition of employment. Below we will discuss the credit check vs. the background check and the information sent to the requesting employer.

1: What Is An Employer Credit Check?

When prospective employers pull your credit report as part of a pre-employment credit check, they do not get your credit score. Instead, they get a modified message that omits any information that could violate equal employment regulations, such as your age or marital status. 

An employer credit history check will look different from what a bank would see if you were applying for a loan or refinancing a mortgage. The modified credit report will show your credit-to-debt ratio and how you previously managed your credit. Specific examples of things that will show on a revised statement are:

  • Open lines of credit (including credit cards and mortgage loans)
  • Outstanding balances
  • Auto loans 
  • Student loans 
  • Foreclosures
  • Late and missed payments
  • Collections accounts

Your prospective employer will likely use Experian, Equifax, and TransUnion. Sometimes the employer might use a third party to conduct the credit history check. Non-financial information will include your current and previous legal names, addresses, and Social Security numbers. Unless you have joint accounts or authorized users on your credit cards, spouses’ credit info won’t be part of your credit check. 

 

2: What Is An Employer Background Check? 

An employment background check is commonplace in almost any organization’s hiring and onboarding process. These types of reviews will verify your identity and social security information. In a background check, a flag will appear if your social security number has been used in the past in conjunction with a different name. Education and employment history will be verified using a variety of databases. One of the most critical components of a background check is the criminal history screening. This search will report the county, state, and federal criminal offenses. Examples of offenses may include the following:

  • Current pending charges
  • Misdemeanor convictions
  • Felony convictions
  • Acquitted charges
  • Motor vehicle and driving offenses 

The criminal history screen is important because the employer could have legal ramifications if they don’t do their due diligence. In addition, if any criminal history is missed in the hiring process, and the employer is accused of further wrongdoing, the employer could face negligent hiring claims.

What Types of Employers Conduct a Credit History Check

In the past,  credit checks for employment weren’t as standard as today. Many employers, even when not required by law, will do additional pre-employment screenings to protect the company from lawsuits or protect their employees. However, specific industries commonly perform credit checks, such as credit checks for employment at a bank. If you are focusing on career planning and setting goals for yourself, you are probably wondering, “what employers will check my credit score or pull my credit report?” This is a very relevant question because if you have bad credit, it can affect the trajectory of your career path. 

So, what jobs will most likely check your credit as part of pre-employment credit check? The most common industries are:

  • Banking or Finance
  • Government 
  • Public Service or Public Safety jobs
  • Pharmaceuticals 
  • Security 

It’s important to note that any job requiring a security clearance will also need a credit history check. This is because they usually involve inside access to money, property, or other assets. They can also include sensitive customer data or confidential company information. 

So, why would these particular industries highly value knowing a potential employee’s credit information?  The answer is simple. Companies want to safeguard themselves from loss and fraud. Employers check credit to detect financial problems in your past that could have negative implications for your future. If you have significant debt, or a spotty history of repaying debt, an employer might think twice. If the position you are applying for is responsible for handling a lot of money, they might not want to take the risk given your history. 

 

Your Credit Report: Be The First To Know 

Your best line of defense if you know or suspect that you have red flags on your credit report is to get a copy. A reputable website, AnnualCreditReport.com, will issue you a free copy of your information from the three major credit bureaus.  Take advantage of this service before applying for a job that will likely conduct a credit check for employment. You might discover some mistakes and can file disputes to have them investigated and potentially removed. According to the Consumer Financial Protection Bureau, one in five people will have an error on their credit report. So make sure you aren’t one of them. 

Pre Employment Credit Checks: What Are Your Rights?

When it comes to pre-employment credit checks, you have certain rights. The Fair Credit Reporting Act (FCRA) is a piece of legislation that offers privacy and discretionary protections as it relates to your personal financial history. It dictates what employers and other third parties can see when they look at your credit report. The FCRA also requires a signature authorizing the release of the information. Without your written consent, the employer can not legally pull this information. You must know the law and understand your rights regarding your credit report and employment opportunities. We hope this article helped shed some light on what to expect and how to prepare if you have bad credit and an employment background check.

What to do next?

The good news is, you CAN take control of your credit. We believe that everyone should have the opportunity to build their financial health. 

Sign up for a Build account today. With a Build credit builder loan, you can build credit and increase your savings.

 

How does a credit builder loan work? 

You make a small contribution to a bank account each month. 

Build then reports those deposits to the credit bureaus as credit-worthy payments, which builds your credit history and profile. 

Positive Payment History – making consistent payments over time –  is the largest driver of your credit score. 

Learn more about how it works or sign up today.