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What Do Employers Look For On A Credit Report?

Current or future employers request a credit report to develop an overall picture of whether or not a candidate should be hired or an employee should be fired or promoted. In developing this picture, a credit report provides such insights as to creditworthiness and the ability to be responsible with money. Many employers look into the deeper meaning of a credit report because creditworthiness for them is indicative of trustworthiness.

An applicant or employee who is responsible financially, as indicated in their credit history, will also more than likely be responsible in the workplace. Employers cannot just randomly look up the credit information of individuals however, they must follow the procedures outlined in the Fair Credit Reporting Act (FCRA).

The Fair Credit Reporting Act was created in 1970 to help individuals remove inaccuracies in credit reports and protect their information from unscrupulous individuals and organizations by maintaining privacy. Credit reports contain specific information about employment, lines of credit and where you've lived previously. Due to the importance of this information, FCRA requires employers to follow various rules set forth in sections 604, 606 and 615 as they pertain to hiring, promotions and terminations. Not only are employers required to inform the applicant or employee that they are requesting access to their credit report but permission must also be obtained in writing by signing a form authorizing access. Also, if the credit report was the deciding factor in an employment decision that must also be conveyed to the applicant or employee.

As mentioned before a credit report is normally used in conjunction with other types of background checks such as verification of employment and criminal records searches. This is especially true for financial organizations where handling money is involved. It is common for entry level bank teller positions to have credit report checks as part of the hiring process due to their access to money. If a credit report shows significant debt such as maxed out credit card lines or multiple late payments, these factors could be considered for hiring or promotion purposes.

Due to the rules outlined in the Fair Credit Reporting Act, employers must notify you that they will be requesting a credit report and must also receive written permission to access your report. If the employer is using a credit report for an adverse action such as termination they are required to issue a pre-adverse disclosure. This disclosure will include a copy of "A Summary of Your Rights Under the Fair Credit Reporting Act" as well as a copy of the credit report in question. Once the employer takes an adverse action they are required to also provide an adverse action notice.

It is important to consider what position you may be applying for, either as a new hire or existing employee, and that for certain positions a credit report may be requested as part of the hiring process. A credit history is just as important if not more so as an employment history because it provides insights into responsibility and trustworthiness that an employment history can't provide. Take advantage of the free annual credit reports provided by each of the credit reporting agencies to monitor your financial information and correct any inaccuracies. Make sure your financial house is in order as it may determine how successful you are in the working world.