Credit checks for job applicants become more common
Employers often run credit reports during applications; you have rights
By John Morell
Can being late with some credit card and other loan payments cost you your dream job?
Let's say there's a competition between you and another person for that great position you've worked so hard for and your interviewer asks permission to run a credit report.
Unfortunately, if you're both equal in every other way, a nasty credit report could be your downfall. "The employer could decide that the person with the cleaner report would be a better employee," says Shawn Smith, a human resources consultant based in Harrison, N.Y. "It is a debatable point, though, since there's no objective proof that people with good credit work better than anyone else, but it's the employer's call."
Traditionally, a credit check has been routine for anyone entering a field where they're handling money (such as a bank teller, cashier or accountant) or in professions where the applicant may have access to people's homes and property (such as a police officer, firefighter, paramedic or home health care provider). The logic is simple: If you're having problems with your personal finances and your job puts you in contact with cash, checks or someone else's valuables, the temptation to steal may get the best of you.
Making sure you are who you say you are
"Someone who's always been honest could be induced to do something rash like embezzlement under the wrong conditions," says Smith. "An employer has to know who to put in positions of trust."
Credit reports are increasingly being packaged and sold to employers who are in the process of "vetting" candidates for just about any job. "There is a growing concern among companies about litigation because if an employee turns out to be a bad citizen and commits crimes, the employer could be blamed for not doing a complete background check," says Smith.
"Our full background checks look at education, employment, possible criminal history, as well as a credit report," says Todd L. Moss*, president of Crimcheck.com, a Cleveland company that provides employee screening to more than 1,000 corporations annually. "It's a comprehensive look at a candidate to let you know who this person is."
Another use of credit reports is to evaluate a person's stability. Credit reports reveal past addresses and too many of those over a short period of time can make you appear flighty. "They also may look at someone with a heavy debt load and think, 'We're only paying X amount for this position, there's no way this individual can pay their bills on that salary so they probably won't last very long," says Smith.
Are employee credit checks an invasion of privacy?
Some view this trend as an invasion of privacy. "Certainly there are jobs where there's a legitimate reason to check on an applicant's credit," says Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse in San Diego. "However, to make it a routine part of the screening process is intrusive."
When a company asks to see your credit, they automatically become bound by the Fair Credit Reporting Act, a federal law governing the use of consumer credit information. Your consent needs to be in writing and you need to be notified "conspicuously." "They can't just give you some forms to quickly fill out before your interview and have you sign a consent form without explaining what it is," says Moss.
Your first step should probably be to check on your credit before you get started on your job search.
-- Paul Stephens
Privacy Rights Clearninghouse, San Diego
The report a prospective employer receives is different from the one seen by a creditor or by individuals. To prevent identity theft, employers don't see complete account numbers, and they don't see the three-digit credit scores used by lenders to determine creditworthiness. They do see derogatory reports, such as late payments, charge-offs, collections and bankruptcies. If you're denied employment because of information in your credit report, by law, the company has five days after the decision to notify you. At that point, again by law, you gain the right to see the credit report on which the decision was based -- for free.
So if you have some credit dings and/or disasters, how do you handle them in a job interview? "Your first step should probably be to check on your credit before you get started on your job search," says Stephens. "You're entitled to a free annual report from each of the three credit bureaus and it's a good idea to make sure there are no inaccuracies. If there are, you can dispute them online."
If you're asked to sign a consent form allowing a credit report to be run, feel free to ask why it's needed and how it's used. Although it may be uncomfortable, it may pay to be honest. "If you have had some credit problems that will show up on your report, letting the interviewer know about it beforehand shows that you're honest and forthcoming," says Smith. "The way the economy is today, there are plenty of good people who have been hurt. Your honesty may not get you the job, but it's better than having them like you and being surprised by your credit report."
The name of Todd L. Moss was misspelled in the original version of this story. See corrections policy.
Published: July 1, 2008
If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.
Three most recent Credit scores, credit reports stories:
What's your 'real' FICO score? All of the above – Have you ever wondered why your FICO score varies from one time to the next? Today it's 700, tomorrow it's 720, a month later it's 785! Then the car dealer runs your credit report and informs you that your score is a mere 699! What happened? ...
Did you like this story? Then sign up for CreditCards.com’s weekly e-newsletter for the latest news, advice, articles and tips. It's FREE. Once a week you will receive the top credit card industry news in your inbox. Sign up now!