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Credit History and Employment

Updated on January 9, 2018
tamarawilhite profile image

Tamara Wilhite is a technical writer, industrial engineer, mother of 2, and a published sci-fi and horror author.

Why Employers Want to See Your Credit History

Employers check someone’s credit history while investigating someone’s background. Employers are reluctant to hire someone deeply in debt due to concerns that the person will steal to help pay their bills. Failing to pay one’s bills on time despite a regular employment history suggests poor character.

However, poor credit history can also be the result of divorce, medical problems and sudden, large expenses. This is why several states have limited the use of credit history as screening criteria during the hiring process. The federal law places further limits on the use of credit history checks during employment.

Banks and financial institutions retain the right to run credit history checks of applicants because their employees handle money or financial information. Police departments, insurance agencies, debt collection firms and government agencies often run credit checks to reduce the risk of hiring those who may commit fraud or abuse positions of authority.

These employers want to see your credit history to determine your trustworthiness, whether or not you can be trusted to handle money and measure how well you pay bills.

For better or for worse, your credit score is often used as a measure of how well you manage money.
For better or for worse, your credit score is often used as a measure of how well you manage money. | Source

Limits on Credit History Checks When Seeking Employment

The Fair Credit Reporting Act or FCRA states that employers must gain an applicant’s consent prior to pulling a credit report. However, this consent form may be a condition of applying for the job or part of a stack of forms an applicant fills out. Job applicants must be told if the employer could reject them because of the credit report results and tell the person if the credit report was the basis of rejecting the job application.

Employers must tell you in writing that they will run a credit history check, and they cannot run credit history checks without your consent. States such as California and Illinois limit credit history checks for those seeking employment unless the credit history is directly relevant to someone’s job, such as manager who would deposit cash at a bank or a law enforcement officer who would be handling evidence, including cash.

Credit scores won't distinguish you from the crowd of applicants for most types of jobs.
Credit scores won't distinguish you from the crowd of applicants for most types of jobs. | Source

When Will Employers Pull Your Credit History After Hiring You?

While the initial job application process is the most common time for employers pull credit reports, it is not the only time a credit history report may be pulled during the employment process.

States which prohibit use of credit reports in employment screening, such as California, makes exceptions for credit history reports to be pulled when someone applies for a management job, cash handling position or any post where applications would be handling sensitive information. Credit history checks are also common when applying for a management position, regardless of your time with the company.

If you have been working as a sales representative and apply for a management position, the employer may run a credit check before promoting you. If you have worked as a secretary and apply for a tax preparation position, your employer can run a credit history check before moving you to the more sensitive position.

If your employer requests that you be granted a security clearance by the federal government, you must agree to a credit history check as part of the background investigation. The credit report will be pulled again as part of the clearance renewal process and any time you are considered for a higher level of clearance.

Credit history checks are routine and periodically performed on defense contractors, employees of defense firms and members of the military. In the case of security clearance holders, failing a credit history check can result in reassignment to another position or termination of employment.

What Shows Up in My Credit History?

Your credit report will show all active accounts such as student loans, mortgages, lines of credit and credit cards. The current balance on these loans and the credit limit will be shown. The credit history report will show debts paid off within the past seven years. However, bankruptcies remain on your credit report for ten years.

Your credit report will list all past due accounts, debts that are currently in collections, foreclosures within the past seven years, outstanding wage garnishments and liens against your property. Late utility bills and back child support will show up in your credit report.

Your credit history will list groups that have inquired about your credit history. Credit inquiries may be voluntary, such as when you apply for a credit card, or involuntary, inquiries made prior to increased credit line offers being mailed to your home.

What Does Not Show Up in Credit Checks?

Entries that age off of your credit report will not show up in a credit check by employers. Bankruptcies more than ten years old are not included in your credit history. Personal loans are generally not listed in credit reports unless the creditor sued for payment and garnishments were ordered. Civil lawsuits do not appear in your credit report after seven years. Accounts that have been closed for seven years or more will fall of the credit history unless there are ongoing collection efforts.

However, it is a violation of the Fair Debt Collection Practices Act or FDCPA for creditors to report debt past the statute of limitations to credit reporting agencies in an effort to harm someone’s credit score and force payment. Debts that were run up by someone else as the result of identity theft or debts incorrectly attributed to you by collectors must be removed by credit reporting agencies when you request that this be done.

Comments

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  • tamarawilhite profile imageAUTHOR

    Tamara Wilhite 

    6 years ago from Fort Worth, Texas

    I know. Going through Dave Ramsey's Financial Peace University left us debt free, but the credit score declined a little. It has since gone back up.

  • Hyphenbird profile image

    Brenda Barnes 

    6 years ago from America-Broken But Still Beautiful

    That whole credit report is an issue for me. It is skewered by ridiculous criteria. An example is that mine fell 200 points when I paid off my car and became debt free. O know employers can see mine is clean but feel badly for people who went through a hard time and are working to get straightened out.

    Thank you Tamara for a very enlightening and interesting Hub.

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