A little less than one-third of employers who employ background checks on job applicants check their credit as part of their research, according to a survey from Career Builder.
While the Fair Credit Reporting Act stipulates that employers need to get your written permission before they do so and can’t see your credit score (they receive a limited version of the report that omits information like your birth date and marital status), they are making some potentially unfair assumptions about you based on your report.
If you’ll be managing money in your potential role, employers may use your credit report to get a sense of your timeliness with your own payments. They can also use information they find on your report to discipline or fire a current employee, according to Nolo, a legal advice site, or check your report before offering a promotion.
“Using lots of available credit or having excessive debt are markers of financial distress, which may be viewed as increasing the likelihood of theft or fraud,” writes NerdWallet.
It’s also used to verify your ID, in cases that require a security clearance.
Currently, 11 states restrict employers’ ability to use your credit report to make hiring decisions, including California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington. The restrictions vary by state, by may preclude employers from checking reports altogether or ban employers from pressuring employees to grant consent for checking the report.
The employer pull won’t hurt your credit. “The credit reports also won’t show other soft inquiries on your credit, so potential employers won’t be able to see if other employers have checked on you,” writes NerdWallet. “But you will be able to see the soft inquiries if you request your own credit report.”
If You’re Adversely Affected By the Credit Pull
If the employer is going to use the report as a reason to deny you employment, the Federal Trade Commission notes they must first give you:
a notice that includes a copy of the consumer report you relied on to make
your decision; and
a copy of
A Summary of Your Rights Under the Fair Credit Reporting Act
You are then given a few days to respond to what the employer has found.
“An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information,” per the FTC. You can then dispute “the accuracy or completeness of any information the consumer reporting company furnished,” and you’re entitled to a free from that company to view yourself.
If they are still going to take “adverse action” (i.e. not hire you or not give you a promotion) despite your response, then they are required to give you a notice of that.
While you don’t necessarily have to grant permission to your employer to pull your report, unless you live in one of the 11 states above, it could hurt your chances of landing the job. Next time you’re shopping around the job market, check your credit at one of the three major bureaus (or use one of the many apps that include credit information) and try to tidy up your report.