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What to Do When Your Employer Wants to Pull Your Credit Report

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If you’re in the market for a job, you may be aware that some employers run credit checks before they decide to hire an employee.

The idea behind this credit check is that employees who are financially responsible will also be responsible at work, and that those who are in financial straits may be more likely to steal or make other bad choices. Whether or not this is actually the case (and a few studies show that it generally isn’t), running credit checks on job applicants is actually a fairly common practice. Here’s what you need to know about them.

There are credit reports that are designed specifically for potential employers to use. They contain much of the information that is found in credit reports pulled by potential lenders, except they do not show your account numbers, date of birth, or references to your spouse. Your credit score is also not included in these reports.

The reports will contain basic personal information (like your home address), other names you’ve used (like your maiden name), information on public records like bankruptcies or liens, and your credit history. These reports also include work history and basic employment information.

Also, employment credit checks are a soft pull on your credit, meaning they won’t affect your credit scores.

You’ll Know If They Pull Your Report

A potential employer cannot legally pull your credit report without your permission.

So, you’ll definitely know whether an employment credit check could happen. You’ll have to sign a release form to give the employer access to your information. And, encouragingly, employers usually only run employment credit checks on the most viable job candidates because these credit checks cost the employer money.

This isn’t true of all employers. Some will run employment credit checks as part of first-round screenings. But they still have to get your permission. However, denying an employer access to your report may put you out of the running for a job.

If you signed a release for an employment credit check, but you know that there are errors on your report, know that you may not be able to correct those errors before the employer pulls your report. It may take weeks or even months to fix.

How You Can Pre-Empt Problems

Here’s where being proactive can work in your favor. First, before you begin your job search, it’s good to pull your credit reports to look for errors (and get to work on correcting them) and identify negative items.  You’re entitled to your credit reports for free every year from the three major credit reporting agencies.

That way, you can be ready to pre-empt any potential issues by being upfront with the interviewer about your recent credit history. This tactic can help paint you as an honest, forthcoming person. Plus, you can actively explain credit problems an employer might see, so that you get a chance to tell your side of the story instead of being dismissed out of hand.

So if you sign a form that gives an employer permission to pull your credit report and you know that there are problems in your credit file, open up. Talk to the interviewer about why you went through foreclosure, or why you’re buried in credit card debt. Better yet, be straightforward about how you’re actively working to fix those problems.

You don’t need to tell your life story here. But giving an overview that basically says, “Look, I’ve had some financial problems. Here’s why. Here’s what I’m doing to fix them,” may give you a better chance at that job.

(Editor’s note: Throughout your job search, it can be helpful to monitor your credit scores, which you can do using a free tool like Credit.com’s Credit Report Card. While employers do not receive your credit score with employment credit reports, your credit score can be a good reference tool for yourself as you work to build or maintain your credit.  If you see an unexpected drop in your scores, it’s important to check your credit reports for errors or even signs of fraud.)

More on Credit Reports and Credit Scores:

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  • http://www.credit.com/ Credit.com Credit Experts

    Many companies no longer pull credit reports for reasons similar to the ones you cited; there have been bills proposed that would make such checks illegal, but so far, they haven’t been passed. You can read more here: Bill Would End Employer Credit Checks. In the meantime, your best bet is to explain any negative information an employer might find before the employer pulls your credit.

  • Joshua Paul

    My father forged my mothers name on credit cards and stole 10,000 in credit. She is now a candidate for a job, but worried she will be rebuked because of my fathers sins. We are working with a credit consoling company right now, but I know for a fact my mothers credit is bad.

    Will my mother have a chance to argue the case before they say no?

    • http://www.Credit.com/ Gerri Detweiler

      $10,000 in credit card debt isn’t the worst I have seen by any stretch and the fact that she is repaying them through credit counseling shows she is taking responsibility for the debt (his debt). She could add a statement to her credit report that she was a victim of ID theft but that could raise more questions she may not want to answer.

      A prospective employer must get her written permission to get her credit reports. If she wants, at that point, she can offer a brief explanation: “I was a victim of family identity theft but I am repaying the debts in full.” But again, I am not sure this is as serious a negative as she thinks it may be.

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