What Are Employment Credit Checks, and Are They Legal?

An employer may check your credit as part of a background check, which is often one of the last steps before a job offer. Before a potential employer can look at your credit history, you must provide written consent. When an employer views your credit report, they’ll be able to view information like your accounts, balances and payment history, but they cannot see your credit score.

A report from the National Association of Professional Background Screeners (NAPBS) notes that 31 percent of employers use credit checks for at least some potential employees, while 16 percent of employers use these checks for all applicants.

Since employment credit checks are fairly common, it can be helpful to understand a bit more about how they work. In this post, we’ll talk about what employers can see on your credit report, why employers conduct credit checks and some other common questions about credit checks.

What does an employer credit check show?

When you give a potential employer authorization to view your credit, they’ll have access to a modified credit report—similar to the report that potential lenders might see during a loan application. However, any information that could violate anti-discrimination laws—like your birth date—is omitted from the report, and employers cannot see your credit score.

Generally, employment credit checks include the following information from your report:

  • Accounts and balances
  • Payment history
  • Negative items like foreclosures or repossessions

 

 

 

 

 

 

 

 

 

 

 

 

 

While bankruptcy may appear on the report, the Fair Credit Reporting Act (FCRA) prohibits employers from using bankruptcy information in hiring decisions. That said, those who have experienced bankruptcy almost certainly tend to have other negative items on their credit reports, which could still affect their chances of getting hired.

Since companies have access to your credit history—with your consent, of course—an important question arises: what do employers use credit reports for during the hiring process? Read on to learn more about the purpose of employment credit checks.

Why do employers conduct credit checks?

Companies that use credit checks during the hiring process tend to believe that financial responsibility may correlate with better job performance. In other words, if you have struggled to maintain strong credit habits in the past, you may not be able to manage the demands of a difficult job.

Additionally, companies that are hiring for roles that require financial decision-making may be hesitant to entrust company funds to a person with a history of less-than-ideal credit choices. Other employers may have concerns about fraud—though there is no concrete evidence that employees with poor credit history are more likely to steal company money.

Overall, the companies that use credit checks to make hiring decisions believe that people with better financial habits are more likely to make good decisions as employees. In other words, if you are able to manage the complexities of credit—like different account types, on-time payments and spending limits—you may be a stronger employee as well.

As a potential employee, you do have credit rights that are important to be aware of.

The federal government allows companies to conduct credit checks for potential employees, but 10 states—including California, Illinois and Washington—have banned the practice as of 2021. Several attempts have been made to pass a law restricting credit checks on a national level, but currently the practice is still legal in the majority of the United States.

However, there are still strict guidelines surrounding the use of employment credit checks. As a potential employee, you’ll want to be aware of your rights so that you’re treated fairly during the hiring process.



Keep in mind that you have the following rights when a company asks you for a credit check after you apply:

  • You must provide written consent ​​before a company can check your credit.
  • Employers cannot see your credit score, and the credit check won’t affect your score.
  • If you are denied a job based on your credit report, the company must explain why you were denied, give you a copy of the report and provide you with information about your right to dispute.

If you are concerned about sharing the information on your credit report, read on for tips on preparing for a credit check.

How to prepare for an employment credit check

If your future employer requires a credit check, you’ll want to consider how to put your best foot forward during the hiring process.

Consider the following if a credit check is a requirement to land your next job:

  • Get a copy of your credit report. You’ll want to have a good sense of what’s on your report before your employer gets a copy. Fortunately, you can get a free copy of your credit reports each year.
  • Write an explanatory statement. If you have items on your credit report that may require explanation, provide that to your employer. For example, perhaps you had a car repossessed while you were unemployed, but now your financial situation has recovered.
  • Look for any inaccurate information. Fraudulent accounts or inaccurate negative items could give the wrong impression to a hiring manager. You always have the right to dispute false information on your credit report.

Preparing for an employment credit check gives you a chance to work on your credit before an employer takes a look at your credit history. Whether or not you’re currently looking for a job, it’s a good practice to review your report regularly.

If you’re looking to improve your credit or file a dispute, it can be helpful to work with a professional. You may want to work with the credit repair professionals at Sky High Credit Repair, who can review your report with you and provide solutions for rebuilding your credit. 

Note: Articles have only been reposted by the Sky High Credit Repair team, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

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