Smart Spending

Can a Credit Report Affect Your Chances for a Job?

Increasingly, employers have been requesting that job applicants consent to a credit check for hiring purposes. Applicants do not have to consent to a credit check. If they do, they should be aware of the dangers of authorizing their credit report to be released. Applicants should also know their rights, and how their credit report could disqualify them for a job.

The first danger that applicants face is that the request for a credit check is a scam. Companies that pose as employers may actually be, or have partnered with, companies that charge the applicant to perform a credit check. Applicants should only agree to credit checks performed by the three main credit bureaus: Trans Union, Equifax, and Experian. This scam can involve tricking the applicant into signing up for a costly credit protection service.

The second danger that applicants face is that the purpose of the credit check is to gather personal information about the applicant. The requesting party then sells this information to other parties. A credit report provides the recipient with the applicant’s name, social security number, past addresses, maximum line of credit, and current debts, including student loans. A credit report also lets the recipient know other companies that have requested a credit report, and information contained in public records, such as court judgments, liens, and bankruptcies. An applicant benefits from only authorizing credit checks by Trans Union, Equifax, and Experian. These three companies use a more secure method of reporting credit. They do not report credit card account numbers, credit risk scores, and age.

Applicants have specific rights regarding credit awarded to them by the federal Fair Credit Reporting Act (FCRA) and similar state civil codes. Employers cannot request a credit report without written authorization from the applicant. If an employer chooses not to hire an applicant based on information in the credit report, the applicant has a right to review the report the employer receives and a statement of their rights. The applicant can also dispute information they regard as incorrect or incomplete. As of January 1, 2012, California employers cannot use a credit report in considering an applicant for a position. There are only a few exceptions to this rule. As of February of 2012, Colorado legislators were considering passing a bill similar to California’s law.

Applicants should know that information on a credit report regarding the opening of new credit lines, a long history of late payments, and the presence of large debts can hurt their chances for employment. Employers are looking for stable, secure individuals who can manage money well. They do not want applicants who are applying for positions because they are desperate. Employers are troubled when they see an applicant has liens, bankruptcies, or foreclosures. They are also concerned by a sudden, short-term history of late fees and a recent opening of one or more lines of credit. All of these items indicate that an applicant is irresponsible, cannot commit to their current budget, and has exhausted their resources.