In today’s job market, employers are looking for any advantage they can get when it comes to hiring the best candidates. One way they screen candidates is by conducting employer credit checks. While there are some restrictions on when and how credit checks can be conducted, they can still provide useful information for employers.
Reasons Behind Doing Employer Credit Checks
There are a few reasons why employers might choose to check credit scores as part of the hiring process. Here are six reasons why:
1. To Determine Financial Responsibility
One of the primary reasons that employers check credit is to determine an applicant’s financial responsibility. A good credit score indicates that an individual is able to manage their finances responsibly and make timely payments. On the other hand, a low credit score may indicate that an individual is not financially responsible and may be more likely to miss work or incur debt while on the job.
2. To Gauge Trustworthiness
Another reason that employers check credit is to gauge an applicant’s trustworthiness. An individual with a good credit score is typically seen as being more trustworthy than someone with a bad credit score. This is because a good credit score indicates that an individual is able to manage their finances responsibly and is not likely to engage in fraudulent activities.
3. To Assess Risk
Employers also use credit scores to assess the risk of hiring an individual. A high credit score indicates that an individual is less likely to default on their debts or engage in other risky behavior that could negatively impact the employer. On the other hand, a low credit score may indicate that an individual is more likely to default on their debts or engage in other risky behavior, which could put the employer at risk.
4. To Evaluate Job Performance
Credit scores can also be used to evaluate an employee’s job performance. Individuals with good credit scores are typically seen as being more responsible and reliable than those with bad credit scores. As such, employers may view employees with good credit scores as being more likely to perform well in their jobs and less likely to cause problems for the employer.
5. To Determine Eligibility For Promotions
In some cases, employers may use credit scores to determine whether or not an employee is eligible for a promotion. Individuals with good credit scores are typically seen as being more responsible and reliable than those with bad credit scores, and as such, they may be viewed as being more deserving of a promotion.
6. To Make Personnel Decisions
In some cases, employers may use credit scores when making personnel decisions, such as deciding who to hire or fire. Individuals with good credit scores are typically seen as being more responsible and reliable than those with bad credit scores, and as such, they may be viewed as being better employees overall
What You Can Do If You’re Concerned About Your Credit Score
If you’re concerned about your credit score affecting your ability to get a job, there are a few things you can do.
Check your credit report regularly.
You can obtain a free copy of your credit report from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion) once every 12 months at AnnualCreditReport.com. Reviewing your credit report on a regular basis can help you catch errors and identify potential signs of identity theft.
Know what factors affect your credit score.
Your credit score is based on a variety of factors, including your payment history, credit utilization, and length of credit history. It’s important to understand how these factors impact your score so you can take steps to improve it.
Use credit wisely.
One of the best ways to improve your credit score is to demonstrate responsible credit behavior. This means using credit only when you need it and making payments on time, every time. Additionally, try to keep your credit utilization low by avoiding maxing out your credit cards.
Consider professional help.
If you’re having difficulty managing your finances or repairing your credit, consider seeking professional help from a reputable organization like Consumer Credit Counseling Service (CCCS). CCCS provides counseling and education on a variety of topics related to personal finance, including budgeting, debt management, and credit repair.
If you know that an employer is going to conduct a credit check, you can always ask them for the opportunity to explain any negative items on your report.
Does An Employer Credit Check Hurt Your Credit Score?
You’ve been on the job hunt for a while and finally landed an interview with your dream company. But then, just before your meeting, you receive an email from HR requesting that you consent to a credit check. You pause—does giving your employer access to your credit report mean that your credit score will take a hit?
The short answer is no—an employer credit check will not directly impact your credit score. However, there are indirect ways in which it could affect your score.
For example, if an employer sees that you have a lot of outstanding debt, they may be less likely to offer you the job (or may only offer you a lower salary than they would have otherwise). This could lead to financial stress, which can in turn lead to late or missed payments—and those definitely will have a negative impact on your credit score.
Additionally, if an employer is considering two candidates who are otherwise equally qualified and one has a higher credit score than the other, they may be more likely to choose the candidate with the better score. So, in that sense, having a good credit score could give you an edge over other job seekers.
While an employer credit check won’t directly affect your score, it’s important to be aware of the indirect ways it could impact both your ability to get hired and the salary you’re offered. Before consenting to a check, make sure you understand your rights as well as the potential risks involved.
All in all, there are several valid reasons why employers request to see your credit score as part of the background check process. While it may seem like an unfair practice, it’s actually quite common and usually isn’t a deal-breaker if you have a few blemishes on your report.
However, it’s always best to try to keep your score as high as possible to improve your chances of getting hired.