5 Things to Know About Employment Credit Check

In the past few years, the rate at which employers perform credit checks on candidates has significantly increased. It is no surprise that many potential employees are failing their vetting process due to bad credit.

What is Employment Credit Checks?

Employment credit checks are a form of background financial check, whereby a potential employer checks your credit history to see how you handle consumer debt. So, what do credit checks entail, and why do employers need them? Here are five things you need to know about credit checks.

Why do Employers Perform Credit Checks?

Many employers argue that performing credit checks on potential employees reduces the risk of fraud being committed. In many industries, especially in the financial sector, a school of thought is classified as a 'bad debtor' has a high probability of committing fraud in the future.

Despite the fact that many people with good credit go on to commit fraud, employers see eliminating 'bad debtors' from their pool as a way of mitigating future losses through fraud.

Apart from fraud, certain things like late payments indicate that the person is not organized and responsible.

1. You have legal rights that protect you from unlawful credit checks.

A person is legally protected from unlawful credit checks by employers. If, for instance, an employer goes ahead to conduct one, you must be notified before they get the green light. If you approve the credit check, you must provide proof that you consent through written permission.

After performing the credit check, an employer must warn you before rejection. If a potential employer rejects you based on information gotten from your credit check, they must send you a pre-adverse action notice, a copy of the report used, and a summary of your rights.

You have a reasonable time to respond to the pre-adverse action notice. After the potential employer rejects you, you have three to five business days to explain any red flags on the report or dispute any incorrect negative information.

After the employer is done performing the credit check, they have to follow up with a post-adverse action notice. The employer gives you the credit report agency's name, its contact information and explains your right to claim a free copy of the report within 60 days.

2. What do employers look for when performing a credit check?

Employers look at some factors to determine your credit score and whether you are the right candidate for their organization. Pre-employment credits checks include:

  • A candidate's County Court Judgments (CCJs)
  • Voluntary arrangements
  • Bankruptcies
  • Debt levels
  • Late payments
  • Unresolved collection accounts

3. You are entitled to a free copy of your credit report.

The best way to prepare for a credit check is by checking it yourself before your potential employer does. This gives you a chance to check for any issues and dispute them long before your potential employer sees them.

You are legally entitled to a free copy of your annual credit check report from the three nationwide credit reporting companies.

4. Some states have strict laws that prohibit or limit pre-employment credit checks.

Although employers in most cities are permitted to do credit checks on job applicants, there are eleven cities where the practice is limited or prohibited. These cities include:

  • Delaware
  • California
  • Colorado
  • Illinois
  • Oregon
  • Connecticut
  • Vermont
  • Maryland
  • Hawaii
  • Nevada
  • Washington

The Bottom Line

Pre-employment credit checks are becoming more common in today's job market. It is, therefore, better to be prepared than to be caught by surprise and left red-faced. Employers are becoming keener in getting the right fit on their team. So, to better your chances of getting the job, you must keep track of your credit, and what better way to do it than doing credit checks yourself before applying for a job?

Don’t wait – get started today! Your free debt analysis and personalized financial solution is just a phone call away...

For a free financial analysis, call 855-906-3235