Blog TLDR

We’re talking about employer credit checks, how they can affect you, and how you can be prepared for your next employer credit check.

What is a credit check and how does it affect you?

Credit can change important financial decisions. Most people understand that credit scores can affect how you get a loan and what sort of rates you are applicable for. Bad credit can also worsen your opportunity for a job in the search for employment, and can have substantial impacts on your career advancement.

Here's How Bad Credit Challenges Your Job Search 1

Employers are allowed to view a modified version of your credit score in what is called a credit check; they don’t see your entire credit report. Employers view potential hire’s credit score information to indicate potential patterns of behavior that could be deemed problematic for the business.

What does an employer look for in a credit check?

Credit checks are used to screen credit scores are looking for various things. More importantly than late payments, companies are looking for patterns of behavior. This can include slow payments, unpaid obligations, foreclosure, outstanding public records, or other serious delinquencies. Larger obligations that are unpaid or past due may make job searching quite difficult. Essentially, the point of sharing credit scores with an employer is so they can search for anything that can ring an alarm of disorganization or financial misconduct. The key is to understand how your financial information could look to a potential employer. To an employer, financial distress could potentially lead to fraud or theft. Lack of financial organization can be quite telling of a person’s character.

A healthy credit check can indicate organizational ability or trustworthiness. An unhealthy credit check could show a risky financial situation or outstanding judgments that hinder your ability to find employment. An employer’s screening process focuses on risk reduction; companies are looking for anything that can be read as a risk to their company. Luckily, there are ways you can take preparation for a credit check in the employment screening process.

How can you prepare for a credit check?

What can you do to prepare for a credit check? There’s no harm in preparing for credit checks by being ahead of unhealthy credit situations. As a good starting point, try to make sure you are paying your bills on time. Payment history directly affects your credit score. Use your available credit lightly, and monitor your credit report regularly to maintain an understanding of your credit situation. You can also sign up for credit monitoring to ensure a healthy credit situation.

Certain countries or states have different laws for credit checks. Check your labor department for more information. Even if you are currently employed, you can be let go for having poor credit. As a general rule, current employers are supposed to give you notification and permission before screening your credit report.

Here's How Bad Credit Challenges Your Job Search 2
Employers are also supposed to warn you before being terminated based on your credit report. This is known as a pre-adverse action notice. After this warning, an employer is meant to wait three to five business days before proceeding with the rejection process. This is meant to give you a period to explain any financial “red flags” on your report. If the employer decides to continue with post-adverse action notice, you have a right to a free copy of the credit report from the credit agency.

Credit checks do not have a negative impact on your credit score. An employer’s action to credit check does not hurt your credit score. Typically, these are known as soft inquiries or soft pulls, which have no effect on your credit score.

There are plenty of resources and services available to help improve your credit for when it comes time for a credit check. Today, there are many applications available to help you monitor your credit score. While an application may not solve your credit woes, they can typically make your credit report information easily digestible and understandable.

Similarly, there are safer, low-risk resources available from many financial companies or banks that can help build credit steadily. Traditional credit monitoring firms are still prominent today, and can easily track and find ways to improve your credit score.

While credit checks aren’t as popular as they were earlier in the decade, a poor credit report during an employment screening process can decide your fate of employment. Know what employers are looking for when they check your credit report, know what the rules and regulations are in your area, and begin using available resources and healthy credit-building reports to improve your credit score. Whether you are employed or seeking employment, and whether your credit score is in a good place or needs improvement, being on top of your credit situation is always beneficial.

Subscribe to our Newsletter

Get all the latest information related to financial wellness, and be in control.

About Chango

Control all aspects of your finances. Learn about what you need to know to make smart decisions. But most of all, have trust that we’re here to help. In the end, you’ll have more time to do what you love.

Our Value's

Passionate
Playful
Approachable
Empowering

Resource Center

Ready for something awesome?