Like it or not – today it’s common for companies to include credit checks when performing background investigations on potential hires.
Some companies prefer to have background checks conducted when you make application for a job. The fact they do perform background/credit checks is generally stated on their job applications as a point of fact. More often than not background and credit checks are done once you are scheduled for an interview or once it’s determined you’re their top choice or one of their top candidates. On the other hand, credit checks aren’t always executed on potential rank and file employees. Although more and more companies are beginning to do so today. That said you should be prepared to have your credit report checked.
It’s highly likely a background and/or credit check will be performed when:
>>You are applying for a position which requires accessing company funds or credit, for example.
>>For management positions
>>For C-Suite positions
That said, more and more companies are performing credit checks on all individuals they intend to hire, regardless of position.
What does a company expect to discover viewing your credit report?
While a company does not see your credit score, here’s a few examples of what they do see:
– Your payment history.
– How you are handling your credit.
– Occasions of late payments.
– Issues such as car, boat and/or home repossession.
What can facts contained within your credit report tell a company about you?
While an applicant’s credit history can provide a variety of valuable information, it – most importantly – can flag potential problems most employers want to avoid.
For example:
- Late payments can suggest you’re unorganized, perhaps you are irresponsible and don’t live up to agreements set.
- Using much of your available credit to pay monthly bills, having excess debt, generally points to financial distress say financial experts. And may be seen as adding to the possibility of theft, fraud, embezzlement.
- Mishandling of your personal funds could suggest your inability to handle company funds and finances. Especially if the position you’re applying or interviewing for includes –
* Dealing with or access to a company’s money, other funds or its consumer info
* A job which requires a clearance
* Access to sensitive employee data
* Access to sensitive customer data
That said, your state may have stronger laws, such as California’s Investigative Consumer Reporting Agencies Act (Civil Code §1786) and the California Consumer Credit Reporting Agency Act (Civil Code §1785). In addition, many state labor codes and state fair employment guidelines limit the content of an employment background check. Under the FCRA, a background check report is called a “consumer report.” This is the same “official” name given to your credit report, and the same limits on disclosure apply.
The Federal Credit Reporting Act says the following cannot be reported:
– Bankruptcies after 10 years have elapsed. Although bankruptcies are part of your public record employers cannot discriminate against applicants because they have filed for bankruptcy. (11 USC §525).
– Civil suits and judgments
– Arrest records – from date of entry, after 7 years.
– Paid tax liens after 7 years.
– Accounts placed for collection after 7 years.
– Car, boat, home or other leased items repossessed after 7 years.
– Any other negative financial information after 7 years.
Who can companies request a credit report from?
Hiring companies can request a credit report from any of these 3 companies – Experian, TransUnion and/or Equifax. Rod Griffin, director of public education for the Experian credit bureau says – “Experian omits info which might violate Equal Employment Opportunity regs such as your date of birth or marital status. An employer credit report does not show your credit score nor disclose account numbers.”
Can a company request for a credit report affect your credit score?
No it cannot. Unlike reports requested by credit card companies, which do affect your credit score, requests from hiring companies do not. These are considered a ‘soft inquiry’. And not to worry. A ‘soft inquiry’ won’t allow a potential hiring company access to names of other hiring companies who may have previously requested a credit report.
Here are the rules as excerpted from the Federal Trade Commission:
An employer or potential employer must –
- “Tell the applicant or employee what they might use the information for – for example decisions about his or her employment. This notice must be in writing and in a stand-alone format. The notice can’t be in an employment application. You can include some minor additional information in the notice (like a brief description of the nature of consumer reports), but only if it doesn’t confuse or detract from the notice.
- Get the applicant’s or employee’s written permission to do the background and/or credit check. This can be part of the document you use to notify the person that you will get the report. If you want the authorization to allow you to get background reports throughout the person’s employment – if hired – as the employer you must make sure that is clearly and conspicuously stated.
- An employer must certify to the company from which they are getting the report they have….
* Notified the applicant and got their permission to get a background and/or credit report;
* Complied with all of the FCRA requirements;
* Don’t/won’t discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations.”
NOTE: Several states have laws prohibiting credit checks by potential hiring companies. And/or place restrictions on how this information is utilized. Contact the Labor Department in your state to discover the rules.
What happens when your credit report includes blemishes or serious issues?
According to the FCRA:
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- A company must tell you orally, in writing, or electronically there were issues with your credit report.
- That you were rejected because of information in that report.
- The potential hiring company must provide you with the name, address, and phone number of the company that sold the report.
- The company selling the report didn’t make the hiring decision and can’t give you the specific reasons a company had for not hiring you. However you do have a right to dispute the accuracy or completeness of the report. And to receive an additional free report from the reporting company within 60 days.
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What you can do – 5 tips:
1. Do a credit check before applying for jobs so you know what to expect if the subject comes up.
2. If you know a company intends to do a credit check, and know slow or late payments will arise, but these result from bills from an unexpected medical issue, be prepared to speak about these. In a case such as this, you may decide to make a pre-emptive strike and write a simple letter describing the situation, which you attach to your application.
3. If asked to fill out a credit request form, you can ask a company to wait until an interview is over and it’s been determined they will make you an offer, or set you up for a second interview for example. At that time you will you sign the credit request form.
4. Prefer not to have your credit report accessed? Be prepared to have your application eliminated from hiring consideration.
5. Is your credit score low? Explain, in the simplest of terms issues which transpired. For example, an issue occurred while separated from your spouse, a serious family problem or medical issue arose, for example.
Bottom line:
Background checks – which usually include credit checks – are being performed by most companies today, as part of the hiring process. Know this and prepare yourself before filling out any job applications or signing” any legal job-oriented paperwork.
Submitted by: Jean L. Serio CEIC, CDI, CPC, CeMA
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