What Do Employers Look for on a Credit Report?

By Lashunda Wilkison

  • Overview

    Employers examine a credit report to help facilitate hiring an individual. They do background checks for illegal behavior that may disrupt the company environment. Credit reports are used on a regular basis to help creditors determine if you are credit worthy. Your credit report tells a story of your credit worthiness, but to employers it can speak bounds of your trustworthiness. Checking a credit report can help with the application process and the Fair Credit Reporting Act (FCRA) has rules in place for employers to follow. Even as a seasoned employee your credit may be checked. It can be a deciding factor if you're hired, fired or promoted.
    What Do Employers Look for on a Credit Report?
  • Facts

    The FCRA was ratified in 1970 to eliminate inaccuracies and to protect the personal information on your credit report. Your credit report encompasses employment, credit and relocation history. Your credit report allows employers to use your previous addresses to run background checks in those cities. Employers must abide by the Fair Credit Report Act when requesting credit reports on an employee or prospective employee. The FCRA sections 604, 606 and 615 sets forth the rules of using the credit report as a hiring, promotional and retention tool. Employers are obligated to state the reason for obtaining a credit report and must have written permission from the prospective employee or veteran employee. If the credit report is the deciding factor on denying employment or promotion advancement, this must be divulged to the applicant.
  • Significance

    Employers use the credit report to verify the social security number given and employment history. Credit reports contain loans, credit cards and your debt-to-income ratio. If negative, these factors can raise a red flag to prospective employers in financial corporations. Employers may think payment history reflects a potential lack of responsibility. The federal government will decline an application or promotion if the job is directly dealing with cash or a security clearance and the applicant is in high debt. In the military a soldier seeking to be a recruiter is required to have good credit and low debt. This decreases the chances of a recruiter falling into deeper debt in rural areas or taking bribes to submit a future soldier. The average employer prefers criminal background checks to decipher an applicant's eligibility rather than credit history. There are businesses that check credit report on a regular basis such as banks, brokerage firms and financial organizations. These organizations depend on trustworthy individuals to handle large amounts of money.

  • Procedures

    Before an employer can receive your credit report he must give a written notice that the credit report may be used for employment purposes. If the employer depends on the credit report for adverse action he is obligated to issue a pre-adverse disclosure. The disclosure would consist of a copy of the credit report and a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act." Once adverse action has been taken, the employer must provide an adverse action notice. The notice states the credit bureau's contact information, says that the credit bureau was in no way involved in the decision and states the applicant's right to dispute any inaccuracies within 60 days.
  • Penalties

    Employers who fail to receive written permission before obtaining a credit report or disclosing pre-adverse action and adverse action can be sued in federal court. The FCRA states a plaintiff is permitted to get back court fees, legal fees and punitive damages. Not only does the prospective employee or current employee have the right to sue, the Federal Trade Commission, federal agencies and state agencies can sue for civil penalties because of nonconformity.
  • Considerations

    Being prepared for a job interview requires more than a resume and good communication skills. It requires a good credit history as well. As a potential employee you know the importance of education and job stability. Having your credit history be a significant part of the journey can benefit your financial life outside of work. Knowing that your credit may play a part in your job can help you stay on track with bills and debts. Check your credit report before applying for a job. Give yourself enough time to dispute or correct any erroneous items on your credit report. Be prepared with your credit as you would with your references, resume, skills, and education while pursuing a new job or promotion.
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