Why Your Employer Is Checking Your Credit

Employers want to see an applicant’s credit report for a number of reasons. They may be looking for stability and trustworthiness, such as if you’re likely to embezzle or steal from the company. Or they may want to reduce their legal liability for negligent hiring. They may also be looking for a history of financial trouble, judgments against you, evictions or criminal charges, or convictions so they can get a sense of the type of person you are.

Credit Score Versus Credit Report
A credit score is the number on your report that measures your credit risk at any point in time. Information from your credit report—payment history, credit utilization, length of credit history, new credit and credit mix—is put into an algorithm to measure credit risk. Your score ranges from 300 – 850. FICO and VantageScore are the two most popular credit scoring models.

A credit report is a record of your credit history. It includes details about your past and current credit accounts and debts, when and where you’ve applied for new credit, and collections that have gone to a third party. Public record information such as evictions, bankruptcies, foreclosures, liens and judgments are also included.

What Employers Can Check
Employers can only check credit reports with an applicant’s permission, and some states don’t allow credit checks at all. The terms “credit score” and “credit report” are sometimes used interchangeably, creating confusion. Federal law only allows a credit report to be checked by an employer, and only then under certain restrictions.

Your employer only gets a modified version of your credit report. It won’t be the same one a lender sees. The modified report will show employers information about your loans and credit cards, but won’t show identifying information, such as account numbers, year of birth, references to your spouse or anything that violates equal employment laws.