More and more companies conduct credit checks before employment. If you are informed in advance that it is going to happen, you can refuse to submit to it, but the employer can also decline to hire you. It is unfair, but it is an inescapable reality. The best you can do is try to avoid credit card and student loan debt and monitor and try to improve your credit score. The credit reporting bureaus are each required to provide you with one free credit report every year; go to
Fair Credit Reporting Act
Under the Fair Credit Reporting Act, an employer must obtain your written authorization before it commences with a background credit check. The authorization must be on a document separate from all other documents such as an employment application. Under federal law, if the employer uses information from the consumer report for an “adverse action — that is, denying the applicant a job, terminating the employee, rescinding a job offer, or denying a pro-motion” — it must take certain steps. To learn more about employer obligations when it comes to credit reports, visit the Federal Trade Commission's Web site, online at
Before the adverse action is taken, the employer must give the applicant a “pre-adverse action disclosure.” This includes a copy of the report and an explanation of the consumer's rights under the Fair Credit Reporting Act. After the adverse action is taken, the individual must be given an “adverse action notice.” This document must contain the name, address, and phone number of the employment screening company, a statement that the employer made the adverse decision (rather than the screening company), and a notice that the individual has the right to dispute the accuracy or completeness of any of the information in the report.
Background Checks and Your Credit Report
The three major credit-reporting agencies — Experian, TransUnion, and Equifax — provide a modified version of a credit report called an “employment report.” This includes information about your credit-payment history and other credit habits from which current or potential employers might draw conclusions about your character. An employment report provides everything a standard credit report would provide, except your credit score and date of birth.
Employers often use your credit history to gauge your level of responsibility. The logic goes that if you are not reliable in handling your credit, you will not be a reliable employee. If you have no credit history, this can also be held against you. The employer is looking for someone who has an established history of responsible money management and bill paying.
The Fair Credit Reporting Act says only that certain things like negative information more than seven years old cannot be considered. The absence of a credit history can also be considered. But if this bit of information means you don't get the job, the employer has to give you an adverse notice decision.
Steps You Can Take
You can take the following steps to reduce the chances that you and/or the potential employer will be surprised by information found in the background credit-check process:
Order a copy of your credit report ahead of time. If there is something you do not recognize or that you disagree with, dispute the information with the creditor and/or credit bureau before you have to explain it to the interviewer.
Do your own background check. If you want to see what an employer's background check might uncover, hire a company that specializes in such reports to conduct one for you. That way, you can discover if the databases of information vendors contain erroneous or misleading information. Or, you can use one of the many online search services to find out what an employer would learn if conducting a background check in this way.
Ask to see a copy of your personnel file from your old job. Even if you do not work there any more, state law might enable you to see your file. You may also want to ask if your former employer has a policy about the release of personnel records.
Always read the fine print carefully. When you sign a job application, you will be asked to sign a consent form if a background check is conducted. Read this statement carefully, and ask questions if the authorization statement is not clear. Unfortunately, job seekers are in an awkward position, since refusing to authorize a background check may jeopardize their chances of getting the job. The only other information this form can include is your authorization and information that identifies you.