Why Do Employers Check Your Credit Report

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For many employers, handing over the reins to the financial aspects of their company to someone may be the most fundamental and important management shift that they will ever face. Ensuring that the capital that funds the organization is safe and secure must be paramount in the minds of every owner, manager, president, and CEO. Therefore every individual that has access to these funds must be screened carefully and diligently through one of the country’s major credit reporting agencies. Why you ask? What does the fact that you have had three cars repossessed have to do with your application for employment? Why would it matter that you claimed bankruptcy last year? Well all the experts agree that what takes place in your personal life finances are highly relevant in relation to your work performance. How responsible you may or may not be with your debts and finances is a personality and behavioral indicator of how you will likely perform the essential functions of the position.

The employer may use the credit report as a part of the selection process but they should be able to prove that there is a position necessity and relevancy such as handling cash or being responsible for large amounts of money. Accountants, banking, and retail are some of the top positions which would require these types of checks. Still, the employer must be cautious in using the credit report as the main selection tool as it could have an adverse impact on protected groups such as minorities and women.

The Fair Credit Reporting Act (FCRA), is a federal regulation that oversees the disbursement of credit information and how exactly an employer is allowed to use said information. First the employer must provide you with documentation in a clear and “conspicuous” manner that they plan to check your credit through one of the country’s major credit reporting agencies and then obtain a written authorization from you as the applicant to proceed. The regulation also states that you as the applicant are eligible to receive copies of the exact report received by the employer and information regarding what specific credit reporting agency was used for the inquiry.

Lastly, the employer must tell you if you were denied employment based solely on negative findings in your credit report. Be sure to obtain your credit report at least once a year and review all activity and information. Remember that not everything on the report is written in stone and you can formally dispute any charges or information that you believe are fraudulent. In addition, there are many security based companies out there today to provide protection over your financial status such as www.LifeLock.com. For a small fee each month they can protect your identity and provide you with copies of your credit reports from all three major credit reporting agencies quarterly so that you can review them and ensure that there is not any fraudulent activity that may cost your job.