Why would an employer look at your credit before hiring?
It’s important for business owners to know as much as possible about their next potential hire before hiring.
Reviewing relevant criminal behavior and credit history too, gives employers insights into potential hires financial habits,
financial responsibility, and their ability to manage budgets.
Numerous late payments could indicate you’re not responsible or organized and don’t live up to your agreements.
Maxing out your available credit or having excessive debt are markers of financial distress, which may be viewed as increasing the likelihood of theft or fraud.
If you show evidence of mishandling your own finances, it could indicate a poor fit for a job that involves being responsible for company money or sensitive consumer information.
25% of all HR professionals use credit or financial checks while hiring.
Credit checks are more likely for jobs that involve a security clearance or access to money, sensitive customer data or confidential company information
What do employers see when checking your credit?
Potential employers see a modified version of your credit report that omits information that
might violate equal employment regulations, such as your birth year or marital status.
An employer credit report does not show your credit score or disclose any account numbers
But it shows your payment record, the amount you owe and your available credit.
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Does an employer credit check hurt your score?
Businesses may use a screening company or one of the three major credit reporting bureaus — Equifax, Experian and TransUnion to get an employer credit report
The credit check does counts as a “soft inquiry” on your credit, but it won’t take points off your credit score in the way a credit card application might.
The reports won’t show other soft inquiries on your credit. This means that potential employers won’t be able to see if other employers have checked on you.
But if you request your own credit report you will be able to see the soft inquiries.
What are your legal rights?
An employer must notify you if it intends to check your credit and must get your written permission.
The Fair Credit Reporting Act requires the notice to be “clear and conspicuous” and not mixed in with other language.
If an employer might reject you based somewhat or totally on your credit report, it must tell you before the decision is made. It has to send you a “pre-adverse action notice,” including a copy of the report used and a summary of your rights.
The employer must wait a reasonable period — usually three to five business days — before it proceeds. The goal is to let you explain the red flags on the report, or, if the negative information is incorrect, let you fix the mistakes with the reporting company.
After it acts, the employer must follow up with a post-adverse action notice, giving the name of the credit report agency, its contact information and explaining your right to get a free copy of the report within 60 days.
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