If I Apply For A Job Will The Employer Pull My Credit Report?

“John, I just got a job with a local bank and they pulled my credit report before they hired me. I wasn’t thrilled about them doing this but I wanted the job so I didn’t want to rock the boat. Is what they did legal, ethical, whatever?  Did it hurt my score?

The practice of employers checking credit reports came to the fore front as more people became unemployed during the recent recession.  Previously, this issue was sort of under the radar.  As more people had poor credit resulting from being unemployed for no fault of their own, it became more of a concern. And of course the considerable misreporting of credit scores being used by employers (rather than credit reports) has also helped to fuel anger over a practice that doesn’t actually occur.

Is a credit report a good indication of what kind of employee someone will be? Some would argue that how you pay your bills is an indication of your responsibility.  It makes sense for jobs that involve handling money and have major responsibilities to require a credit report. Others would argue there is no correlation between credit management and employee quality.  Still, would YOU hire someone to be your teller or in house CPA who just filed bankruptcy and has tax liens?

FCRA

One of the provisions of the Fair Credit Report Act, also known as FCRA, lists who can view consumer credit reports and under what conditions. Employers are included on the list. An employer can conduct a background check which can include a credit report for the purpose of employment screening. The consumer must give the potential or present employer written permission to obtain this information.

Both types of employers (current and prospective) receive almost everything on the credit report such as personal information, credit inquiries, loan and credit card payment history, collections, public records such as bankruptcies and liens. They don’t receive your date of birth, credit card account numbers or credit score.

Potential employers can review your credit report, but with your written permission.  There are several states that restrict this practice depending on the job type.  Potential employers correlate financial responsibility with how well you will do your job. This may not be fair and may only be applicable if you are handling money. If you refuse, this may cost you the position.  If you have poor credit, it is better to inform the potential employer and explain why you have poor credit.

Current employers can also review your credit report.  When you accepted the position and gave them permission to access your credit report, you probably did so going forward as well.