Six Myths About Employment and Credit Checks

Competition for good jobs can be fierce these days, and knowledge is power. There are so many myths regarding your employment status and your credit score that people take at face value. We want to explore these myths and see which ones have validity and which ones are entirely untrue.

1) Most employers examine all the applicant's credit information.

Certainly, if you do not have any credit problems, you are in the clear. Still, even if you do, according to this study done by SHRM, only 13% of employers will check all available credit data before a hiring decision. In most cases, an employer would need a definitive reason to do a deep dive into your financial situation. Any business that checks every credit score is most likely a financial institution that does it for security reasons.

2) An employer can request your entire credit history.

You must give written authorization to an employer to look at your entire credit history. An employer can get a shorter version of the report with data about debt, but it will not be the credit history that you get if you request it. Many states have laws prohibiting employers from gaining various information about your credit history, and some have laws prohibiting employers from using the information in hiring decisions.

3) Employers and lenders are both interested in your credit history for the same reason

Lenders will lean heavily on your credit report when they decide if they will loan you money. This makes sense as lenders want to see a return on their investment. Credit history, however, will be just one of many factors in deciding if companies are going to hire you. Work history, your skill set, and your interview will also play an essential role in hiring decisions.

4) You can be denied a job based on your credit history with no warning

If an employer decides not to hire you based on your credit history, they must warn you. The warning is to give you a chance to dispute what your credit report says about you. You can see more about this warning and how to fight your credit report here.

5) Poor credit automatically means you won't get hired

As stated earlier, your credit history is only one part of what your employer will be analyzing. Many employers are only looking for the most obvious of red flags, like bankruptcy. Even if you have a bankruptcy on your credit report, however, it is widely recognized that many successful people have had financial failures before the found success. Businesses want candidates who are the right fit for the job, not necessarily candidates with financial acumen.

6) Employers are explicitly checking your credit to disqualify you

Most of the time, employers are doing a credit check as part of due diligence. In case they are sued due in some part to your actions, they want it to be clear that they thoroughly looked into your past before hiring you. All employers are risk-averse, and they'd rather find out the information, and have you explain it, then find it out after there is a problem.

Everyone is looking for ways to better their financial situation and livelihood. If every person who had terrible credit were unable to find work, there would be no way to improve yourself. At the same time, having good credit will only help you secure financial independence.