How Much Emphasis Do Employers Place on Credit Rating?

Under the Fair Credit Reporting Act (FCRA), employers must obtain a written release, or approval, from an employee or job applicant to request that person's credit report. The employers obtain these reports directly from suppliers of credit, such as credit card corporations, department stores that offer credit cards and gas companies. Employers use credit histories in employment decisions for jobs where an employee will be handling cash or have access to sensitive financial information.

Credit Rating

People often misperceive a credit rating, or score, as being part of a credit history report. Actually, credit reports requested for hiring purposes do not contain credit scores. In fact, the three major credit bureaus use a format that omits actual credit card account numbers, credit risk scoring and the person's age. Therefore, a job applicant need not be concerned with a credit rating, but instead focus on the information within his credit history.

Credit Report

A credit report for employment purposes contains identifying data, such as the person's full name and addresses, payment and credit data, records of others who have requested that individual's credit report, and certain public records, such as judgments, liens and bankruptcies. Essentially, employers view people's ability to manage their finances competently as indicators of reliability and responsibility in the workplace. An employer may also be concerned that an applicant under financial stress may be prone to theft or embezzlement.

Bankruptcy

Until recently, the federal Bankruptcy Act prohibited employers from discriminating against applicants because they filed for bankruptcy. However, a December 2010 federal appeals court ruling states that a private employer may deny employment based on the applicant having filed for bankruptcy. If you're concerned that a bankruptcy noted in your credit history may prevent your being hired, discuss it in your job interview. Briefly explain the circumstances, and then focus on your strengths for the job position.

Adverse Action

Adverse action is any action taken against a job applicant based on information in the person's credit report. The FCRA provides job applicants the rights to review their credit reports and dispute any incorrect or inaccurate information within it. A person may also request the credit bureaus to forward their corrected reports to anyone who accessed the credit history in the prior six months, and to any employers who requested it in the past two years.

References

• "The Safe Hiring Manual"; Lester S. Rosen; 2007
• Business.gov: Pre-Employment Background Checks
• Privacy Rights Clearinghouse: Employment Background Checks: A Jobseeker's Guide
• Privacy Rights Clearinghouse: How Private Is My Credit Report?
• Bankruptcy Law Network: Bankruptcy Discrimination in Hiring Approved by Federal Appeals Court

Resources

• The Fair Credit Reporting Act