Credit Check for Employment: Why Do Employers Check Credit?

Key takeaways

• Employers can check your credit report unless you live in a state or city with laws that make hiring credit checks illegal.
• An employment credit check shows limited details about your credit report, including your debt, payment history and any liens or bankruptcies.
• Employers won’t see your credit score or income.
• A pre-employment credit check won’t affect your credit score.

What is a credit check?

A credit check is exactly what it sounds like — a review of your credit history and activity. Lenders check your credit when you apply for loans and credit cards, and landlords and employers can check your credit when you apply for a lease or job.

Because a hiring credit check is a soft inquiry, it won’t impact your credit score.

But employers can’t just check your credit without your knowledge or consent as part of their hiring process. They have to follow a specific set of guidelines from the Fair Credit Reporting Act (FCRA). Here’s what you need to know:

• Employers must tell you they plan to check your credit. They have to tell you in writing, and this notice has to be separate from the job application itself so you don’t miss it when you’re scanning the fine print. They also have to notify you if they plan to pull your credit throughout your employment.
• You must consent before they pull your credit. The employer must get your authorization in writing in order to move forward with the credit inquiry.
• You’ll have the chance to explain your credit report. If the employer plans to reject your job application based on your credit, they have to tell you in advance and give you a copy of your credit report. This will give you the opportunity to explain any additional circumstances or inaccuracies on your credit report.
• Employers have to tell you if they decide not to hire you based on your credit. If the employer rejected your application because of your credit, you won’t be left wondering why you weren’t hired. Employers legally have to tell you if your credit was the reason behind their decision.
• You have the right to dispute information on your report. You can dispute errors on your credit report by contacting the credit bureau that provided the report directly. Once the credit bureau has corrected any mistakes, you can ask it to send the revised report to the employer.
• You can get another copy of your credit report for free. Everyone can get a free copy of their credit report from each of the credit bureaus on a weekly basis. But if your job application was rejected because of your credit, you’re entitled to a free copy of the report from the credit bureau the employer used to pull your report within 60 days.

Don’t know what your credit looks like? Check your credit score for free in two minutes.

Why do employers check credit?

Employers might run a background check and credit check to confirm an applicant’s identity and to evaluate how they manage finances and personal responsibilities. They can legally use this information to decide whether you will likely be a reliable employee.

If you have a history of missed payments or bankruptcy, an employer may be concerned about your reliability on the job.

What can employers see when they check your credit?

Employers can see a limited version of your credit report, which shows your credit history for the last seven years. Here’s what they’ll see:

Can poor credit affect employment?

Yes, it can. Employers won’t see your three-digit credit score, but they can see your payment history, bankruptcies and liens. Companies can legally make hiring decisions based on the information they see in your credit report.

There are exceptions for job candidates who live in certain states and cities where hiring checks are illegal.