Does a Low Credit Score and Your Financial Information Appear on a Background Check?

08/05/2024

CREDIT SCORE CONCEPT

It likely won’t surprise you to learn that 95% of companies perform background checks on potential employees. What may come as a shock, though, is that 16% also conduct credit checks on all job candidates and 31% run financial or credit inquiry on some candidates, per an HR.com study.

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The job hiring process is unnerving enough without a possible employer rummaging through your financial back pages. Indeed, your main reason for applying to a position might be to eventually free yourself from past credit troubles.

However, according to CNBC Select, prospective employers are allowed to check out your credit history as part of a background check, but they can’t see your credit score. But that shouldn’t necessarily put your mind at ease. Your 3-digit credit score rating can give an employer the opportunity to discriminate during their hiring decision, but all the information that goes into determining your score is up for viewing.

That includes credit card account information and balances, available credit and payment history. “They see largely what a lender sees, except for your credit score,” said financial expert and ex-FICO and Equifax employee John Ulzheimer.

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Why Would an Employer Check Your Credit History?

There are many different types of credit scoring models, the most common ones, like the FICO scoring system, use five factors to determine your score: payment history, amounts owed, length of credit history, new credit and credit mix. Depending on these factors, your credit file will have a score ranging from 300 (poor) to 850 (excellent).

As Lending Tree explains, a company reviewing your application may want to do a background check — which may include your work, driving or criminal history — and may also choose to screen your credit to determine if something in your background “may signal disorganization, carelessness or even criminal tendencies.”

“Credit reports indicate whether or not you’re responsible,” Ulzheimer told Select. “And, they also indicate if you’re in financial distress. These are attributes that are important to employers. For example, would you want to hire someone in your accounting department who can’t manage their own obligations?”

In addition to seeing your credit and debt sources, a check will show things like loan repayment details, debt collection data, bankruptcy filings and insurance info.

Does a Credit Check Impact Your Credit Score?

As Select states, employers are more likely to request credit checks for persons applying for financial-specific roles within a company or a job that requires a worker to handle money. And luckily, although an employer-requested credit check seems like an overly invasive step in your application process, it’s considered a “soft” inquiry on your credit history.

A “soft pull” inquiry gets recorded but doesn’t affect your credit score, as opposed to a “hard pull” inquiry, which are conducted primarily on loan applications and the opening of an account of a certificate of deposit (CD), are recorded on your credit history and normally result in a loss of credit points (because they mark the times when you have applied for new credit). Typically a hard credit inquiry results in a hit to your credit score of five points or less, per Experian.

Whether you find a credit check by a potential employer inappropriate or not, you do have some recourse. Companies have to inform you of their intention of a background and credit check and can’t do request a credit inquiry without your consent, as outlined in the Fair Credit Reporting Act (FCRA).

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“Unlike every other credit reporting scenario, you must be given a separate notice indicating the employer is going to pull your credit reports,” said Ulzheimer. “And you have to give overt written permission.” Unfortunately, while you can refuse a check on your credit, a company can likewise refuse to hire you as a result of your nonconsenting.

Why Would an Employer Check Your Credit History?

Does a Credit Check Impact Your Credit Score?

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