Like it or not â today it’s common for companies to include credit checksÂ when performing background investigations on potential hires.
Some companies prefer to have background checks conducted when you make application for a job.Â The fact they do perform background/credit checks is generally stated on their job applications asÂ a point of fact. More often than not background and credit checks are done once you are scheduledÂ for an interview or once itâs determined youâre their top choice or one of their top candidates. On theÂ other hand, credit checks arenât 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 toÂ hire, regardless of position.
What does a company expect to discover viewing your credit report?
While a company does not see your credit score, hereâs 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?
- Late payments can suggest youâre unorganized, perhaps you areÂ irresponsible and donât live up to agreements set.
- Using much of your available credit to pay monthly bills, havingÂ excess debt, generally points to financial distress say financialÂ 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.Â Especially if the position youâre applying or interviewing for includes –
* Dealing with or access to a companyâs 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 ReportingÂ Agencies Act (Civil Code Â§1786) and the California Consumer Credit Reporting Agency Act (Civil CodeÂ Â§1785). In addition, many state labor codes and state fair employment guidelines limit the content ofÂ an employment background check. Under the FCRA, a background check report is called a “consumerÂ report.” This is the same “official” name given to your credit report, and the same limits on disclosureÂ 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 recordÂ employers cannot discriminate against applicants because they have filed for bankruptcy. (11 USC Â§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 â Experian, TransUnionÂ and/or Equifax.Â Rod Griffin, director of public education for the Experian credit bureau says â âExperianÂ omits info which might violate Equal Employment Opportunity regs such as your date of birth or maritalÂ status. An employer credit report does not show your credit score nor disclose account numbers.â
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,Â requests from hiring companies do not. These are considered a âsoft inquiryâ.Â And not to worry. AÂ âsoft inquiryâ wonât allow a potential hiring company access to names of other hiring companies whoÂ may have previously requested a credit report.
Here are the rules as excerpted from the Federal Trade Commission:
An employer or potential employer must –
- âTell the applicant or employee what they might use the information for – for example decisionsÂ about his or her employment. This notice must be in writing and in a stand-alone format. TheÂ notice canât 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 doesnâtÂ confuse or detract from the notice.Â
- Get the applicantâs or employeeâs written permission to do the background and/or credit check.Â This can be part of the document you use to notify the person that you will get the report. If youÂ want the authorization to allow you to get background reports throughout the personâs 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;
* Donât/won’t discriminate against the applicant or employee, or otherwise misuse theÂ information in violation of federal or state equal opportunity laws or regulations.â
NOTE: Several states have laws prohibiting credit checks by potential hiring companies. And/or placeÂ restrictions on how this information is utilized. Contact the Labor Department in your state to discoverÂ the rules.
What happens when your credit report includes blemishes or serious issues?
According to the FCRA:
- A company must tell you orally, in writing, or electronically there were issues with yourÂ credit report.
- That you were rejected because of information in that report.
- The potential hiring company must provide you with the name, address, and phoneÂ number of the company that sold the report.
- The company selling the report didnât make the hiring decision and canât give you theÂ specific reasons a company had for not hiring you. However you do have a right to disputeÂ the accuracy or completeness of the report. And to receive an additional free report fromÂ the reporting company within 60 days.
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,Â but these result from bills from an unexpected medical issue, be prepared to speak about these.Â In a case such as this, you may decide to make a pre-emptive strike and write a simple letterÂ 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 isÂ over and it’s been determined they will make you an offer, or set you up for a second interviewÂ 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 eliminatedÂ from hiring consideration.
5. Is your credit score low? Explain, in the simplest of terms issues which transpired. For example,Â an issue occurred while separated from your spouse, a serious family problem or medical issue arose, for example.
Background checks â which usually include credit checks â are being performed by most companiesÂ 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:Â Jean L. Serio CEIC, CDI, CPC, CeMA