Can Employers Use My Credit Score for a Pre-employment Screening?
Over the past few weeks, we have looked at what your credit score really is, what you can do to improve a less-than-perfect score, and what you can do to help build good credit over time. This week, we’ll take a look at another aspect of credit that is shrouded in myth: the employer credit check.
Can prospective employers access your credit report? The short answer is “Yes,” but only an amended version, only with your permission, and only if your state allows it.
First, it is important to note that potential employers will never see your actual credit score. That number will not appear on your employer-facing report. The three main credit bureaus actually have a separate report they run specifically for employers, called an “employment screening,” and it excludes information such as your date of birth, for example. But it will include your full credit history, listing your open and closed accounts and any late payments.
A persistent myth states that employers can pull your credit report without you knowing about it. In fact, they must obtain your express, written permission before submitting a request. And it must be its own separate document — they can’t just include it as a standard clause buried in a generic agreement. This gives you the opportunity to talk about any negative items ahead of time and offer explanations.
You can refuse to sign the agreement; however, the employer has the legal right to decline to hire you on that basis. Before they officially decline you, they must send a “pre-adverse action” disclosure, which includes a copy of the report upon which they are making their determination as well as a “Summary of Your Rights Under the Fair Credit Reporting Act” from the Federal Trade Commission, which has information about how you can challenge any incorrect information that might be in your credit report.
Once the company has made it official that they will not hire you, they are then required to submit a formal “adverse action” notice which again explains the action they are taking, why, and an explanation of your rights.
A few other important points to note:
1. You Might Not Have to Worry About a Credit Check for Employment.
California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington have laws that prohibit employers from obtaining credit reports or using creditworthiness as a criterion for prospective employees. More than 20 additional states have pending legislation addressing the issue. Some could restrict the release of certain information or join the 10 states that ban the practice outright.
2. Your Employer Might Not Review Your Credit.
Most employers who include credit checks in their hiring process utilize a third-party company that performs the reviews and manages the process of adverse action disclosures and notices. If that is the case, your new boss won’t know details about your credit cards, mortgage payments or auto loans.
3. A Pre-employment Screening Won’t Affect Your Score.
Happily, employment screenings don’t count as “hard inquiries” on your report, and they will not appear in any form on the reports received by prospective creditors.
If you live in a state in which credit reports are considered fair game for employers, you have one more good reason to monitor credit by pulling your reports from all three bureaus on an annual basis. By ensuring you always know what is on your report — and correcting any errors — you could save yourself a lot of headaches and quite possibly put yourself in a better position to land your dream job.