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An employment credit check occurs when an employer looks into your credit history before offering you a job. The federal government approves of these checks as they are normal for background checks.
Employers can initiate an employment credit check during the background check process, which is often one of the last steps before you receive a job offer. Potential employers need your written consent before they can look into your credit history, which will let them view information like your accounts, balances and payment history. However, they can’t directly see your credit score.
A report from 2023 indicates that 68 percent of employers most value fast and accurate background checks during the hiring process. Since employment credit checks are fairly common, it can be helpful to understand a bit more about how they work. Here, we’ll talk about what employers can see on your credit report, why these checks occur and how they might affect your credit standing.
What does an employment credit check reveal?
When you give a potential employer authorization to view your credit, they’ll have access to a modified credit report—similar to the report that potential lenders might see during a loan application. However, any information that could violate anti-discrimination laws—like your birth date—is omitted from the report, and employers cannot see your credit score.
Generally, an employment credit check discloses the following information:
- Accounts and balances
- Payment history
- Negative items like foreclosures or repossessions
And here’s some information an employment credit check won’t reveal:
- Your credit score
- Your medical bills
- Certain identifying information (age, race, ethnicity and marital status)
- Your income
- Any account numbers for your credit accounts
While bankruptcy may appear on the report, the Fair Credit Reporting Act (FCRA) prohibits employers from using this information in hiring decisions. That said, those who have experienced bankruptcy almost certainly tend to have other negative items on their credit reports, which could still affect their chances of getting hired.
Since companies have access to your credit history, an important question arises: how can your credit report affect the hiring process? Read on to learn more about the purpose of employment credit checks.
Why do employers conduct credit checks?
Companies that use credit checks during the hiring process might believe that financial responsibility correlates with better job performance. In other words, if you have struggled to maintain strong credit habits in the past, you may not be able to manage the demands of a difficult job.
Additionally, companies that are hiring for roles that require financial decision-making may be hesitant to entrust company funds to a person with a history of exceeding their credit limits. Other employers may have concerns about fraud—though there is no concrete evidence that employees with poor credit history are more likely to steal company money.
Overall, the companies that use credit checks to make hiring decisions are looking for specific financial habits. If a candidate has a strong credit history, an employer might view them as a responsible individual. However, you also have distinct credit rights as a potential employee.
Are employment credit checks legal?
The federal government allows companies to conduct credit checks for potential employees, but 10 states—including California, Illinois and Washington—have banned the practice as of 2024. Several attempts have been made to pass a law restricting credit checks on a national level, but currently, the practice is still legal in the majority of the United States.
However, there are still strict guidelines surrounding the use of employment credit checks. As a potential employee, you’ll want to be aware of your rights so that you’re treated fairly during the hiring process.
Keep in mind that you have the following rights when a company asks you for a credit check after you apply:
- You must provide written consent before a company can check your credit.
- Employers cannot see your credit score, and the credit check won’t affect your score.
- If you are denied a job based on your credit report, the company must explain why you were denied, give you a copy of the report and provide you with information about your right to dispute.
How to prepare for an employment credit check
If your future employer requires a credit check, you’ll want to consider how to put your best foot forward during the hiring process.
Consider the following if a credit check is a requirement to land your next job:
- Get a copy of your credit report. You’ll want to have a good sense of what’s on your report before your employer gets a copy. Fortunately, you can check all three of your credit reports for free each year.
- Write an explanatory statement. If you have items on your credit report that may require explanation, provide that to your employer. For example, perhaps you had a car repossessed while you were unemployed, but now your financial situation has recovered.
- Look for any inaccurate information. Fraudulent accounts or inaccurate negative items could give the wrong impression to a hiring manager. You always have the right to dispute false information on your credit report.
Preparing for an employment credit check gives you a chance to work on your credit before an employer takes a look at your credit history. Whether or not you’re currently looking for a job, it’s a good practice to review your report regularly.
FAQ about employment credit checks
Below, we’ll answer three common questions about employment credit checks.
Can you be denied a job because of bad credit?
Yes, poor credit can bar you from attaining a job in certain states and in specific situations. And if an employer doesn’t hire you based on your employment credit check, they’re legally obligated to disclose that.
However, in some states, like California, it’s illegal for an employer to make hiring decisions based on your credit score.
What is the minimum credit score for employment?
Employers aren’t allowed to place a minimum credit score requirement on a role, and they can’t view your credit score during a background check. They can only see information like your payment history.
Seeing too many late payments could give an employer a negative impression, but they can’t explicitly hire or deny applicants based on their scores.
Is it normal for an employer to check your credit?
Employers regularly conduct background checks, and an employment credit check is almost a guarantee for financial management roles. An employer who denies an applicant based on a credit check must formally explain their decision and provide a copy of the report they viewed.
Get your credit questions answered with Lexington Law Firm
If you’re looking to improve your credit or challenge a credit report error, it can be helpful to work with a professional. Consider using the credit repair services provided by Lexington Law Firm—we can review your report with you and provide options for rebuilding your credit.
In 2023, we provided over 600,000 free credit report assessments—and we’re happy to help with your credit-related questions.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
