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Why Employers Can Ask for Your Credit Report

Why Employers Can Ask for Your Credit Report

Next time you apply for a job, don’t be surprised if your prospective employer asks permission to review your credit report. This practice is becoming increasingly common in the workplace. In fact, according to the Society for Human Resources Management, 35% of the companies surveyed pulled the reports of potential or current employees last year. That means there is a good chance that the information contained in your report could help or hinder your chances of getting or keeping a job. Read on to learn why companies review job applicants’ reports and what your rights are in the process.

Purpose

The theory behind employer credit report reviews is that an employee’s financial behavior is often indicative of his/her level of responsibility, accountability, and dependability. Large amounts of debt may also indicate serious financial trouble, which could potentially affect the employee’s performance on the job. Typically, the employers are most interested in financial information when they are hiring someone who will be dealing directly with cash or other sensitive financial information. An employee’s financial woes may heighten the risk of embezzlement.

Although a credit report review has become a more orthodox part of the hiring process in recent years, most companies are far more concerned with other types of background checks. Unless you will be dealing directly with money, the information on your report is unlikely to cost you a job by itself. In fact, research has shown that credit is actually not a valid predictor of workplace theft. Criminal history, particularly one involving bounced checks, is a much more accurate predictor. In other words, a clean criminal history and identity verification report are usually much more relevant than the results of your review.

Restrictions

Technically, a company you are applying to does not have the right to pull your report. You must sign a document giving the employer permission to do a credit check or the employer will violate the Fair Credit Reporting Act by doing so. Of course, if you withhold permission, you will most likely lose the position. Additionally, the credit reports employers receive are different from traditional reports because they are somewhat censored. They indicate the payment history on all of your accounts, but they do not reveal account numbers, your birthday, or your marital status.

Your Rights

If your employer wants to run a check on your finances, make sure you’re aware of your rights, which we’ve outlined below.

  • Your employer must get your written permission every time a check is run. Your employer must obtain your signed consent any time a third party is hired to conduct any sort of background check, including a credit check.
  • Federal law prohibits employers from using a bankruptcy as a reason not to hire, retain, or promote an employee. The employer, however, can use past delinquent payment behavior as a reason to deny you a job.
  • The employer must tell you if your financial information is used against you. The employer is required to give you a copy of the report along with an explanation of your Fair Credit Reporting Act rights. The employer must also tell you where the information was obtained, how you can contact the reporting agency, and that you have to right to dispute the accuracy of the report.

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