Job Credit Checks Are Becoming a Thing of the Past

Depending on your state of residence, you might no longer be subjected to a credit check when applying for a job.

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Depending on your state of residence, you might no longer be subjected to a credit check when applying for a job. This is welcome news for many job seekers, as the downturn in the economy has had a negative impact on the household finances of American workers. Although credit reports were designed to help lenders predict loan repayment, some employers (especially those in the financial services industry) use one’s credit history to deny or offer employment or to grant a promotion.  According to a poll conducted by the Society for Human Resource Management, 60% of employers use information in a potential employee’s credit report when making a hiring decision.

Fifteen states and the District of Columbia will vote this year on how employers can use your credit report when making an employment decision. Such legislation has already been enacted in the states of California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington.

Here are some fast facts about credit checks and employment:

  • Under the Fair Credit Reporting Act, an employer must obtain your written permission before conducting a background check.
  • When checking your credit report, know that employers can’t see your credit score, only your history. Employers receive an adjusted version of your credit report (called an employment report) from the three major credit reporting agencies.
  • If you apply to a job with a salary of $75,000 a year or more, your employment report may include bankruptcies more than 10 years old, accounts placed in collection more than seven years old, and records of arrest more than seven years old.
  • After you’ve been hired, employers are allowed to run periodic credit checks when deciding to keep, transfer, or terminate an employee. They do not need to ask your permission again.

Your best bet is to obtain a copy of your credit report before applying to your next job. That way, you can check for errors and be prepared to give answers for anything that might appear questionable. If you are applying for a job that involves driving, you should also get a copy of your driving record from the Department of Motor Vehicles and check for mistakes.  Avoid surprises and prepare yourself for any and all questions about your background.

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