Ask Matt: Why are Credit Reports used in Employment Background Checks?

  • Article by: MATT KRUMRIE , Star Tribune Sales and Marketing
  • Updated: January 10, 2011 - 12:04 PM

Why should this matter be considered? What should I do to make sure this is in tip-top shape before applying for a job and how can I know they check my credit score and it's a factor in the decision-making process?

Dear Matt: Why do employers check credit scores and how does a credit score reflect on me as a worker? Why should this even matter or be considered?

Matt: Using credit reports is another tool that employers use when conducting background checks. It's all a part of the process to make sure they do their homework on candidates and make sure they are making the right choice when hiring. It has become another part of the hiring process - like checking references, validating employment history and/or verifying educational records.

A poor credit report doesn't make one a bad person, or mean they will be a bad worker. In fact, in some cases those who previously made poor financial decisions may now be better, more motivated workers because they never want to get back to that stage again. However, employers may not be as lenient, especially when it comes to hiring and that's why a credit report now plays a role in some hiring decisions. Employers have to leave no stone unturned and a poor credit history may be a red flag in the eyes of some employers, especially those hiring workers who may be making financial-related decisions with a company.

"I have clients that run credit checks on potential employees where the position will be directly involved in financial matters at the company at a high level," says Tony B. Nelson of TBN Consulting, LLC (tbnconsulting.biz), a Twin Cities-based search firm for direct-hire, contract and freelance professionals within the marketing profession.

But, Nelson adds, it's not just the credit reports of financial professionals that are being checked. "This is done across numerous industries and includes a variety of positions - not just CFOs, CPAs, and accounting," says Nelson.

How do you know if an employer is checking your credit report? The Fair Credit Reporting Act (FCRA) requires employers to obtain your consent before obtaining a credit report. If a candidate is not hired due to information obtained in a credit report the employer must show the candidate a copy of the credit report and instruct them on how to get a free copy of their credit report. To obtain a free copy go to annualcreditreport.com or call 877-322-8228.The three major reporting agencies (TransUnion, Equifax and Experian) are required to provide a free credit report annually under FCRA.

Do you have an employment related or job search question for Matt? E-mail him today at askmatt@startribune.com.

All responses will be in the paper and no names will be used to protect your privacy.

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