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Are you still believing in these employer credit check myths?

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By: Phil Bradford
on 7th Sep,2016

Employees often hold some credit check myths true. Find out the truth behind the myths about credit report checks by employers.
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Getting a job in your dream company can be tough due to the fierce competition these days. Before hiring, the employers do their research very well. Though some employers run a credit check on current and prospective employees, it won’t hurt your credit score.

There are certain myths associated with employer credit checks, so let’s find out the truth behind these myths:

Myth No. 1 - Most employers check all applicant’s credit reports

Truth:

According to the report from Society for Human Resource Management 2010, on “Background Checking: The Implications of Credit Background Checks on Hiring Decisions,” 6 out of 10 organizations pull credit reports of some candidates, and only 13% check them all.

Tony Deblauwe, founder of the human resource consultancy company HR4Change, and author of "Tangling with Tyrants: Managing the Balance of Power at Work," said that “typically the credit check is not for all jobs.”

If you are in a finance related or an executive level job, you can expect your employer reviewing your credit report. Not all employers check credit reports of their employees.

Though many employers check credit reports of their employees, few check all and that’s too for a specific reason.

In words of Christopher Desbarres, president of Help Unlimited, “It should be one of, if not the, last things you check. Otherwise, you are wasting time and money. It is not a good tool for weeding out potential applicants.”

Myth No. 2 - Employers and lenders hunt the same information

Truth:

Your employers and lenders don’t look for the same information on your credit report. While lenders give importance to credit reports, it’s only a small part of your employer's assessment. Employers check a lot of things apart from your credit report like communication skills, honesty, technical expertise, determination and persistence, work ethics, and so on.

Lenders check your credit score, whereas employers don’t check scores.

If needed, employers go for a background check. Generally, the companies tend to go for a longer term assessment on your credit report.

Myth No. 3 - Poor credit will disqualify you right away

Truth:

You might think that with a bad credit record, your resume might get tossed. Is that so? Will you be disqualified due to poor credit? Well, the answer is NO.

You won’t face a rejection if your credit is not good.

Your employers aren’t expecting your credit to be 100% perfect. If you’re brilliant at your work, employers may ignore your credit history.

Myth No. 4 - Employers pull credit reports to discriminate

Truth:

Employers pull credit reports for legal protection. As per attorney Sonya Smith-Valentine, “If an employee does something allegedly wrong and they get sued, the attorney will get their file. If the company did not do an appropriate background check, they can use it at trial.” Moreover, companies conduct credit background checks to negate theft and fraud and to curtail negligent hiring. In reality, employers use credit reports to protect themselves.

Myth No. 5 - Employers aren’t concerned about your reasons for having bad credit

Truth:

You might think that employers don’t care much about your reasons for having bad credit. But, the reality is different. Employers care a lot about your reasons for having bad credit.

Before your employers check your credit report, it’s better that you disclose everything to them.

If you do so, employers will be able to trust you. Hiding things from employers isn’t good for your job health. As per a study of the Human Resource Management, “Eighty-seven percent of organizations report that they allow job candidates, in certain circumstances, the chance to explain results.”

Do you know: Why employers conduct credit checks

Myth No. 6 - Every negative information is bad

Truth:

Not all negative information is bad. There is some information, which is more alarming than others. A report by the Human Resource Management found that employers are “most negative about you being sued for a debt and that results in a monetary judgment.” Another thing that is viewed negatively by employers is “not paying your bills and having them land in collections.”

So, there is certain information in your credit report that can hurt your job application negatively more than others.

What do you need to know about employers checking your credit history?

  • According to the Fair Credit Reporting Act, employers need your permission before running a credit or background check.
  • Under the Title 11 of the U.S. Code, employers cannot discriminate among individuals who have filed for bankruptcy. In short, employers can’t use bankruptcy against you.
  • Employers must inform you about your credit information being used against you.

Will an employer credit check hurt your credit score?

Employer credit check won’t hurt your credit score because it’s not counted as a “hard inquiry.”

This inquiry will only be shown in your personal credit report. When employers pull your credit report, it’s neither used in calculating credit scores nor it’s shared with other lenders and businesses. So, you don’t need to worry about it.

A piece of information:

States such as California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington have laws that prohibit employer credit checks or using creditworthiness as a criterion for hiring employees.

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