You spend hours perfecting your resume and cover letter for your dream job. The interview goes smoothly and the employer wants to offer you the position. But there’s one more hurdle to pass: the background check, which includes a credit screening.
To your surprise, the employer is forced to pursue other candidates because your credit profile doesn’t quite check out. Bummer.
Fortunately, understanding how employer credit screenings work will help you better maneuver the application process if your credit profile is subpar.
The Case for Employer Credit Screenings
Employers are not only concerned with the candidate’s qualifications, but their character outside of the workplace. By analyzing the contents of the credit report, employers can gain further insight into the following:
- The candidate’s ability to manage money responsibly
- Financial hardships
- Decision-making skills
Issues in any of those categories are a cause for concern that may lead to employee theft or irrational decision-making for personal gain later on down the line.
If you’re applying for a position in the financial sector or any other industry that grants you access to valuables or cash, a credit screening will more than likely be required.
Under the Fair Credit Reporting Act (FCRA), employers generally cannot access your credit report without your permission. If you live in California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont or Washington, this practice is also severely limited.
You should also know that employment credit screenings have no impact on your credit score and employers will not have access to your score at any time during the process.
What you do outside of the workplace isn’t necessarily your employer’s business. But if it shows up on your credit profile, your secrets are now exposed. Reasoning: the credit report distributed by the hiring department will only omit your FICO Score and any other personal information that cannot be considered when making a hiring decision. That means everything else, including your credit card accounts, auto loans and mortgage loans are fair game. Plus, any other credit missteps, such as bankruptcies, liens, judgments and charge-offs, will also show up.
You could be denied employment based on the contents of your credit profile. However, the employer must provide you with a copy of the credit report used to make a decision and allow you to correct any inaccuracies before making a final decision.
In the event you do not grant the prospective employer approval, you may be perceived in a negative light and the employer may move on.
How to Prepare Yourself
Prior to submitting your application(s), retrieve a free copy of your credit report at annualcreditreport.com and correct any inaccuracies. If you have any past due obligations, bring them current and continue to make timely payments. Also, work diligently to reduce debt balances and refrain from opening new accounts. Doing so will definitely boost your credit score and demonstrate your willingness to get back on track, financially.
Be honest and upfront with the prospective employer. State your case in the most brief manner possible and communicate any efforts you’re making towards improving your financial situation.
As a last resort, you can always consider employment with entities who don’t require a credit screening.