Looking for a job requires a lot of preparation, including polishing your resume, finding promising jobs, and preparing for job interviews. But there’s one important part you might not see on your application: your credit report.
Many companies run credit checks as part of their hiring process. Employers may not have access to your three-digit credit score, but other information on your credit report could make the difference between landing your dream job or being rejected. Here’s what you need to know about when employers can check your credit and how they can use that information when making hiring decisions.
Why do employers check credit?
Employers can legally check your credit report. Some employers may wish to use this information to inform hiring decisions and determine suitability for the position. Employers can run credit checks for:
- Verifying your identity
- Confirming your previous employment and experience
- Assessing your ability to handle money
- Evaluating your financial and personal stability
Background checks for employment often include checking the applicant’s credit history, as well as criminal records and other public records. However, potential employers should always get your written permission before running a credit check.
Potential employers typically work with agencies that conduct background checks on job applicants. However, not all applications include a credit check. This is because this information is more relevant to some roles than others.
What shows up on a credit check for employment?
Federal law allows credit checks for employment, but companies can only see your credit report or record. A background check often includes asking for a copy of your credit report, but employers will receive a redacted version called an employment report.
For example, the employer’s credit check does not include:
- Income
- Credit score
- Race/ethnicity
- Religion
- Political party affiliation
- Medical bills
- Marital status
However, employment reports also contain other information about you:
- Your credit accounts and payment history
- Identification and address information
- Employment information, including past work history
- Public record details, including bankruptcies or liens
Can a credit check for employment hurt your score?
There are two types of credit checks: hard and soft.
A hard credit inquiry can temporarily hurt your credit score, but a soft inquiry won’t hurt your credit score at all. Hard credit inquiries are usually used to open new lines of credit, such as credit cards or personal loans.
An employer credit check is considered a simplified loan application because you are not applying for a loan. There is no hard credit check on the report, so it won’t affect your credit score.
How to prepare for a credit check for employment
The fact that your credit can affect your eligibility means it’s even more important to prioritize building and maintaining good credit. In fact, job seekers may want to focus on their credit reports rather than resumes or other important employment documents. Here are some ways to improve your credit score to make the best impression on potential employers.
Check your credit report
Federal law entitles you to a free credit report review once every 12 months. Remember, access has been granted every week since the coronavirus pandemic began. And you can get a free copy of your credit report anywhere. Visit www.AnnualCreditReport.com and contact the big three credit bureaus. You can access your credit file for free even if you are unemployed and planning to look for a job or if a potential employer has made a claim against you based on your credit report. Please review your statements, including all billing and billing information, to ensure that the information contained in your statements is correct and error-free.
Pay your bills on time
A history of consistent and on-time payments on your credit report demonstrates good personal management skills and responsibility. To keep your debt balances low and payments affordable, it’s best to limit your borrowing.
Be ready to explain your credit report
If your credit file contains negative information, discuss this with your potential employer and be prepared to provide details of any extenuating circumstances. Hiring managers may consider late payments differently if the delay is due to an issue such as a health emergency rather than overspending or poor money management.
