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Employee Credit History

Why Employers Check Credit History and How It Impacts Hiring?

Some employers will complete a credit check to learn a bit more about any potential hire. They may be curious to see if there are any signs of financial distress with the employee that could make them a risk for fraud or theft within the business. They will not see the whole credit score for an employee, but will see a modified version of the credit report so they can make better decisions before hiring.

Why do employers check credit scores?

Some employers, depending on what industry they work in, will need to know specific information about the employee before hiring. These credit reports will flag any potential problems that an employer would want to avoid ahead of time. Some of these flags include:

  • If the applicant has a lot of late payments on their credit report, it is a sign that they struggle to live up to their agreements or they are not responsible and organized.
  • Using lots of the credit available or having excessive amounts of debt may signal financial distress. Some employers may view this as an increased risk of fraud or theft from that employee.
  • If the job has to do with company money or consumer information, evidence on the credit report that the applicant struggles to handle their own money could make them a poor fit.

What will employers see on the credit check?

The employer will not be able to see each item on the credit report when they complete this background search. The report will omit any information that could violate equal employment regulations. This would include marital status and birth year information. It will also never show any account numbers or a credit score to the employer.

There are a few things that will show up on this report. It will show all of your payment records going back several years. It may also show the amount that you owe from those accounts and any credit available.

Legal Rights

Employees do have legal rights when it comes to these employment credit checks. The employer needs to let you know if they plan to check your credit and get written permission from you first. Some states will prohibit these checks or they will restrict how employers are able to use the information from the credit check. Each area is different so it is important to know your rights based on where you currently live.

If the employer rejects your application based at all on the credit report, they need to tell you before that decision is officially made. They can do this by sending a pre-adverse action notice. This must include a copy of the report they used along with a summary of all your rights before they continue.

The employer then needs to wait a reasonable amount of time, usually somewhere between three to five business days, before making their decisions. The waiting period is to give you time to explain any red flags on the report or fix any negative information that is incorrectly on the report. After the employer acts, they must follow up with their post-adverse action notice. This needs to include the name of the credit reporting agency, the contact information, and all the employees’ rights to get a free copy of that report for the next 60 days.

Can I refuse an employer credit check?

You always have the option of refusing one of these credit checks. Some companies ask for you to voluntarily give this credit check and will not hold it against you if you say no. However, other companies may make this a requirement before you are hired. If this is a requirement for employment, you can refuse, but it will likely hurt your chances to be employed.

Employee Credit History Discussion

At Affordable Background Checks, we are happy to help customers pull up background checks on any potential employee. Our services provide comprehensive details in each search including asset records, legal judgments, and bankruptcy records and more to make sure you are hiring the right person for the job. Visit our website today to complete your background search and hire the right employees for your business.

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Gavin Muirhead

Gavin Muirhead has been involved in developing products for background checks and improving online experiences in the background screening industry since 2012. He is the lead author and editor of Affordable Background Checks.