One of the issues that has received a lot of attention lately is that of employers checking the credit of job applicants. Supposedly, an employer can only look at your credit report — and only a version that is meant for employers to see. Employers are supposed to get your permission before checking your credit report, and they are expected to stay away from your credit score. (There are some anecdotes involving employers who check credit scores, but credit bureaus claim they don’t knowingly give scores out to employers.) Many people are upset that employers are asking to see your credit report, while others contend that it is a necessity for some jobs. What happens if employers start checking credit scores?
Do You Want to be Reduced to a Number?
While you can deny your permission for a potential employer to check your credit report, there are concerns that you might not get the job if an employer thinks you have something unsavory to hide. Even so, when an employer has to look at an entire credit report, he or she must see the whole history — and possibly even see a statement you might have included about mitigating circumstances related to negative items on your credit report.
If prospective employers were to look at your credit score, any nuance would be gone. Suddenly, you could be dismissed from consideration for work in the same way that some lenders deny you a loan due to your credit score. Some employers might still consider you, even with a less than perfect credit score, but your score could negatively influence an employer’s opinion of you.
Shouldn’t Some Jobs Require Good Credit?
On the other hand, some contend that there are jobs where good credit is a must. A credit score would help employers see, at a glance, who is most likely to fit the proper criteria. It’s much faster than going through an entire credit report; all it takes is a quick look. Some of the jobs that might warrant a credit score check include:
- Security position: If you are going to be a security guard, a low credit score may indicate money problems. Employers might worry that you will be vulnerable to bribes.
- Position handling money: It might be appropriate for those who are in positions of trust with money to be subject to a credit score check. After all, if your low credit score is an indication of money problems, employers might worry that you could be tempted to embezzle.
- Knowledge of propriety information: Those with access to sensitive or proprietary information might be in a compromising situation, and employers could worry that they might sell secrets to get out of money trouble.
What About Those without Extensive Credit Histories?
With a credit report check, employers can see what has happened for someone without an extensive credit history. However, a credit score many not reflect the responsible habits of someone without much of a credit history. This means that someone might be passed over just because they haven’t been using very much credit. And, for someone who is scrupulously responsible with money, that can be quite unfair.
{ 22 comments… read them below or add one }
Lack of credit may not be all that revealing when someone is just starting out in life but can say a lot about the level of responsibility and what that person might bring to an employer. The employer should be allowed to obtain credit and character references but should let the applicant know that checking credit will be a part of the process. Then the applicant can explain any anomalies.
I certainly agree that an applicant should know about a credit check and have an opportunity to talk about what their score is. They should also get a copy of their scores if they are pulled.
I’m not keen on it. In Europe, only lenders can pull credit scores and they have nearly no identity fraud compared to here.
New rules about licensing for mortgage lenders are requiring us to have our credit pulled. Somehow I don’t think lenders were making bad loans because they needed to fix their credit situations. I think they were doing it because it was a perfectly legal (but very unethical and unsustainable) way to make lots of money fast.
Hmm, wonder if the thought process is such that a lender who is knee-deep in debt might have an incentive to give bad loans for the commissions?
Of course they should be allowed to check your credit score! They are the ones who are going to be paying you, so if they want to check you out, they should be allowed to do that.
If you don’t like that, maybe this isn’t the right work environment for you!
Well, if any employer could do that then what is the right work environment? Do you think any employer has a need to check a credit score?
Employers should be able to check credit scores only if prospective employees can check the credit scores of those who interview them. What’s good for the goose, etc. All of us have been affected by the corporate shenanigans that have taken place in recent years in the housing and banking industries. Moral lapses led to these financial debacles, so a two-sided process for checking an employer’s background should be in place just as it is for employees. The only way this two-sided credit-checking process should be waived is when a prospective employer decides it isn’t necessary on their end.
Let’s face it: in most cases, a credit check won’t show an employer how worthwhile an employee will be. It’s an invasion of personal privacy which was never part of the hiring process not so very long ago. So it should become a two-way street.
Interesting thoughts.
For many companies you can check their credit rating.
I do agree that a credit check may not show much for many jobs. For some though, perhaps there is some merit?
Agreed. I don’t think a credit report has anything to do with work ethic, especially if you just made some bad decisions and are cleaning things up. Stockbrokers and money managers always say ‘past performance is not indicative of future results’ and that should go for employers checking credit reports as well.
As an employer I would want it. But for consumers and our personal liberties, I think your credit score should be far more private. Not to mention that most people’s reports have errors, thus potentially negatively affecting your score. If an employer wants to hire me, then they can ask me to check it. Once they have my permission then they can move forward. But I don’t think they should be able to just check your score if they want to.
There’s a big problem with credit scores – possible errors and no one uniformity among scores.
As an employer it gives you one more piece of the puzzle in figuring out who that person in front of you is. Though as the employee, your personal life takes a more prominent role.
Now imagine that the candidate had to borrow a lot of money for medical expenses, so the person has a huge debt and her credit score is a disaster. Or maybe the money was to pay a lawyer for her divorce. What then, should the candidate have to explain her past medical condition? Her marital issues? Give her a break, she’s applying to a job, not trying to marry the company. Besides, in the three paragraphs of jobs detailed in the article, it’s all about what “might” happen if. Do we want to go there? Next thing will be the police checking on any citizen for what the person “might” do, that reminds me of a movie I saw recently with Tom Cruise.
In the case of medical expenses, if an employer is going to be paying for your benefits do you think they have a right to know about your history?
And just because you have debt it doesn’t mean your credit score will be bad. Non-payments, or late payments would be more detrimental, I would think?
But I do see your point. A divorce or medical procedure doesn’t tell anything about how a person will perform with a company.
As a former CFO, I think all of my financial staff would have a background/credit check. All executives who had budget responsibility/authority should also be included. If you handle cash, they too should be included too.
I think I can see the logic in having those with access to cash having their credit checked and wanting those people to have better credit records.
You are correct, those that have responsibly chosen to live debt free would be unfairly harmed by potential employers using a credit score to filter the candidate pool.
Why would someone who is responsibly debt-free be harmed by having their credit score checked?
I think so. If banks wouldn’t trust you with borrowed money, why should an employer trust you with to run/work inside their business?
There’s not always a direct relationship between how you deal with your money and what you do at work. Not all jobs have to do with administering money. Whereas there is a direct relation between receiving money, what the bank lends you, and giving it back, debt payoff. Maybe the employer would also be interested in how you treat your parents, your kids, your neighbours, how you treated your teachers… that’ll let the employer know how you will deal with colleagues, bosses, customers, suppliers…
We can try to give the employer as much information on the prospect employee as possible…ok, but as someone proposed above, I’d like to have this information too on the people I would be working with. It’s only fair. Would the employer be willing to reciprocate? And don’t get me wrong, I have nothing to hide and a very good professional reputation. But what I do at home and how I manage my finances is none of my employer’s business, unless there is a direct, scientifically proved relationship.
I’ve thought about the case where if you are going to handle a million dollar account for a company (not necessarily money, could be billing and such), shouldn’t you be able to pay your electric bill on time (could be any bill, just saying)?
The question for employers is such that, if you can’t handle your own monthly bills, can you be expected to keep up with all of the paperwork of a big client?
This would make for an interesting study. Ask employers who their best employers are and then as the employers if they can have their scores checked.
If anyone knows of research like this?
I think employers should only be able to pull credit reports for prospective employees that would handle financial business for the organization.
I think that’s the law here in California.
The FICO score is a proprietary formula… only the credit score agencies know all the ins-and-outs of the formula!
With such an important number dictating what happens in our lives nowadays, why isn’t the formula PUBLIC? All we get is how items are weighted in the score but nothing definite…
Has anyone met someone with an 850? What kind of job do they hold? It is so easy (too easy?) to ruin one’s credit due to circumstances outside of one’s control, such as transportation and health problems etc. Too, the items linger unnecessarily on credit reports when the issue has long since been resolved!