What Happens When an Employer Wants to Pull My Credit Reports?

You’re applying for a job and the prospective employer requests that you complete a form that gives them permission to obtain your credit history.  Can they do this?  Is it really legal to look at someone’s credit report before hiring them?

Yes, they can.  Employers can pull your credit reports because the Fair Credit Reporting Act (FCRA) gives them the right to do so. They can obtain a consumer record on you, which includes a credit report and other data as part of the background check. They must have your written permission to obtain a credit report.

If you are denied employment because of your credit, your must receive a copy of the report and a statement of your rights. You can review the credit report and dispute any inaccurate information. This only applies to third parties that conduct the background check; it does not apply if the employer does their own background check in-house.

What information do they receive? The receive almost everything on the credit report such as personal information, credit inquiries, loan and credit card payment history, collections, public records such as bankruptcies and liens. They don’t receive your date of birth, credit card account numbers or credit score. They can’t review negative information more than 7 years old such as collections and public records, except bankruptcies after 10 years. This does not create an inquiry on your credit report. And, this does not apply to jobs with a salary over $75,000.

It makes sense for employers to obtain a credit report for the applicants for jobs that have access to funds, trade secrets, client assets and sensitive personal information. Even if you are not applying for a job that handles money, many employers still want to obtain your credit history to determine how responsible you are with your own money. They consider this a reflection of your character. Some of the areas they consider a problem are bankruptcies, foreclosures, collections, over extended on credit or very close to it, and delinquencies on payments.

Because of the present economic situation, more consumers have bad credit. It is unfortunate that employers are reviewing credit reports for jobs that don’t involve money handling. This is another reason for you to be aware of what is on your credit report and to check it for any errors.  If you do have some negative information, you may be able to talk to your potential employer and explain it.  You won’t have an opportunity to do this AFTER they’ve turned you down and hired someone else.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.


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