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Why Your Credit Report Matters to a Potential Employer

by Miranda Marquit

Increasingly, as part of the background check when you apply for a new job, employers are asking if they can have a peek at your credit report. It is true that they are supposed to get your permission before looking, but denying your permission could be seen as a negative that could hurt your job prospects.

Why does a potential employer want to look at your credit report? Many people wonder why an employer would care about what is going on with your finances. However, there are some reasons that employers might be interested in knowing how you handle your debt obligations:

Security

The most understandable reason that certain employers may may want to look at your credit report has to do with security. If you will be working with sensitive information, or if you are in a position where you are handling money, employers might want to know whether or not your poor financial situation would make you vulnerable to bribe attempts. If you have a lot of debt, some employers might worry that you would be willing to sell proprietary information to a competitor, or that you might embezzle funds that you are overseeing.

My brother in law was denied a job as a security guard due to blemishes on his credit report. While employers have to let you know which credit bureau’s report was used as part of the decision, and while you are entitled to a free copy (in addition to your free annual copy) of your credit report when an adverse action occurs because of the information it contains, it does little to comfort you when you don’t get the job you want.

Other Concerns About You

Another reality is that some employers use the information in your credit report to make judgments about what sort of employee you will be. Increasingly, there are those who not only use your credit report as an indicator of how you meet your financial obligations, but also as way to judge your character. If you are not responsible with your credit, some employers might fear that you will cause problems at work, or exhibit laziness on the job.

Judging potential employees in this way may not seem fair to many people. Indeed, the fact that credit reports and credit scores are becoming such an important part of everyday life and decisions about you and your abilities, is a sore point for many. However, this doesn’t mean that it isn’t happening.

Reducing Behaviors to Numbers

Everyday, employers, insurers, lenders, cell phone providers, lenders and others make decisions about who they think will be reliable based on information in your credit report. In some cases, your entire character will be judged by a single number. While employers, at least, aren’t supposed to look at your credit score (although some do), they can still get a lot of information from your credit report. Whether you move around a lot, how much debt you have, and even what names you have used in the past can be information they receive from a credit report.

In a world where information is easy to come by, and where our financial moves are tracked regularly, it is easy to see why more people are relying on this information to make judgments about you — even character judgments that may not be fair.

Do you think employers should look at credit reports when making hiring decisions?


Published or updated April 22, 2011.
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{ 7 comments… read them below or add one }

1 Ravi Gupta

They should. I’m going to be working in accounting and that’s definitely not an area that you want someone with bad credit to be working. It’s such a behind the scenes operation that if a competitor were able to bribe an accountant if a company paid independent auditors to purposely mess the books then you have big issues.

-Ravi Gupta

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2 Pat S.

Those scores are indeed important. As a military member, I’ve seen people lose their security clearance and subsequently their jobs because of poor credit.

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3 krantcents

As a former CFO, a credit report is important for anyone who handles money, management responsibility, and security. In other words, everyone!

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4 Blindfolded Monkey

It is important although I am not convinced it should be. When most people thing of “bad credit” they think of people who are not paying their bills on time or have gone bankrupt. In reality, a credit score is based on much more than that and there are many people with a low credit score who have never missed a payment in their life.

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5 Accidental Retiree

Having worked in human resources, I can appreciate why prospective employers want to check credit; however, when you’ve been out of work and are searching, you end up getting quite a few hits on your report and it ends up affecting your FICO score!

I decided that next time I am in that situation, I will politely explain to a prospective employer that when I am close to being selected for a position, I will be happy to allow them to check my credit but that until that time, I am keeping my SSN and my credit info to myself.

I would hope that some smart employer out there would appreciate my responsibility to my own creditworthiness in protecting my FICO score!

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6 Hunter

I agree that employers should have the right to look at a prospective employee’s crdit history. But it can’t be viewed in isolation. Only looking at a bad score, or a few late payments and holding it against an individual is like a Dr getting an elevated cholesterol reading on one blood test and declaring you dead.

With people experiencing unemployment at the highest levels since the 1930’s it’s reasobale t expect some late payments. In fact, it is smart to stop paying your unsecured debts when you have cash flow issues, and I believe it is ethical, as long as you don’t accumulate any further debt.

It must be looked at with an open mind, and as a conversation starter, not the end of the game. Remember too that most credit reports have errors.

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7 Red

No, I don’t think it’s fair, even though I’m resigned to playing the game. I work hard to maintain my credit, but all it takes is a divorce gone bad, an extended bout of unemployment or unexpected medical bills to throw even the most financially responsible off kilter. Most incidences of bankruptcy are for these reasons, are they not? I’ve been lucky…so far. Your credit score is but a snap shot of how well you’re able to pay your bills at a particular point in time and nothing more. That it is used to determine how well you’d do a job or your base character is just plain wrong. I agree with the previous commenter that said credit scores should be viewed as the conversation starter and not the end of the game, but I think all too often that’s what’s happening.

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