Does a Company Check Your Credit Report?

Dec 07, 2023 By Triston Martin

Credit reports may not be on your mind while you're looking for a new job. However, prospective employers may request authorization for a background check as part of the application process before they hire you. Checking your credit record might be part of that screening.


When you're looking for a job that needs you to handle money or sensitive information, you're more likely to have your credit checked. The use of credit history in employment choices may be restricted in some jurisdictions.



The Reasons for Employers Checking Credit Reports


Every loan and credit card account you've applied for and opened, as well as the length of time you've held each one, are all included in your credit report. Financial organizations utilize this information to do their job to decide whether or not you can be trusted to repay loans or credit card payments.


Aspiring managers and those who handle secret information are the most likely to be subjected to a credit check as part of a job application. You may also be subject to a credit check if you're being evaluated for promotion.


Employers use credit checks to determine whether or not you are trustworthy and can manage your finances well. Candidates who are adept at managing their money may be assumed to be as adept at handling high-stakes job assignments.


Do Employers Have Access to Your Credit Report?



There is no way for an employer to do a credit check to know your credit rating. The report they get contains information that adds to your credit score, such as your payment history, and repeated late payments may be a reason for concern. The three-digit credit card number, on the other hand, is left out.


The screening process will not impact your credit score. That's because a credit check is a "soft inquiry" and hence isn't deemed invasive. When you apply for a loan or a credit card, a hard inquiry is made on your credit report.


This sort of inquiry is distinct from an informal investigation. In contrast to a rash of hard questions, a single soft question doesn't indicate a need for additional credit. Thus lenders are less likely to be alarmed.


Credit Report vs. Credit Score


As an introduction, let's look at how your credit report and score differ. When it comes to determining whether or not you'll be able to get a mortgage or a loan, your credit report is your best guide.


An individual's credit score is a numerical representation of their overall creditworthiness. A high credit score indicates a reasonable credit risk, whereas a low credit score indicates a terrible threat.


Do Credit Checks Affect Your Score After a Job Change?


Hard inquiries occur when applying for a loan or credit card, and the lender does a credit check. For a brief period, your credit score may suffer from too many complex queries. On the other hand, employer credit checks are not subject to this kind of scrutiny.


An employment credit check is a "soft inquiry" since it does not necessitate a new credit application. As a result, a credit check for job purposes is not seen as a red signal by lenders and does not affect your credit score.


Can Your Credit Disqualify You from a Job?


You may be denied employment because of your credit history in most states. It might either be the only cause for the rejection or one of several contributing factors. However, several jurisdictions restrict the use of credit checks in hiring decisions.


California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington are just a few of the states within this category. Public employers in Delaware are only allowed to conduct credit checks when making employment choices.


For example, New York City and Chicago have laws prohibiting the use of credit checks by employers. Visit the website of your state's labor department for further information on its rules.


How to Approach a Credit Check


By monitoring your Experian credit report, you may prevent being surprised when an employer does a background check on you. AnnualCreditReport.com also provides you with a free credit report from each of the three major credit reporting agencies—Equifax, Experian, and Transunion.


Verify that all of the data is accurate, including your name and address, the accounts have shown, and the history of payments. Dispute any inaccuracies you discover with the credit bureaus by following their specific internal procedures.


Once an employer has your permission, some job screening businesses allow you to get a copy of the amended credit report that they would view. To ensure that all of the information is correct, you may use this to double-check.


Summary


Arming yourself with information is essential if you're looking for a job or promotion where a credit check may be required. You should check your credit report as soon as you start looking for an appointment so that you may fix any errors or enhance your credit using time-tested tactics like making all of your payments on time. This can assist you in avoiding being turned down for a job because of your bad credit.

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