Credit Report (NOT Score) Used By Employers

Can Employers Check Your Credit

"So...how's your credit?"

Did you catch the recent story about employer credit checks in USA Today?

It was about the fairness of employers using credit as a means to differentiate candidates.

Side note. My high school math teacher used to tell me all the time that life was not fair. I would always reply, “well, it should be.”

Anyway, the article got a lot of attention and was even discussed by Neil Cavuto and Dave Ramsey yesterday. I didn’t catch the entire segment, but from what I heard Dave (who preaches to forget FICO) missed an opportunity to reject the notion that a person’s credit score could affect their ability to get a job.

An employer can check your credit report, with your permission (thanks to the Fair Credit Reporting Act) and use it to help them make the hiring decision.

The problem is that the USA Today story originally (they’ve since corrected) intermingled the terms “report” and “score” as if they were synonymous. You guys know they aren’t. And you know it’s an important distinction.

  • Your credit report is a detailed list of your credit history: your credit accounts, status of those accounts, payment history, etc.
  • Your credit score is the numeric representation of your report.

One is detailed, one is not.

More importantly, as noted recently by credit expert John Ulzheimer, the credit bureaus don’t provide scores to employers. That’s a myth. They only provide the report.

Credit Scores Not Used By Employers

Why is this important?

Well, for one, employers aren’t making an employment decision based off of one single number. Naturally, any self-respecting person feels it ridiculous for anyone to make a judgement about them based on one factor. That would certainly be unfair.

Second, and most important, a report doesn’t look bad (to an employer) if there is lack of credit history or lack of a mix of credit types (two of the five factors that make up the score). A report only looks bad if there are bankruptcies, foreclosure, late payments, etc.

So, Dave Ramsey can keep on preaching that you don’t need to use credit to get a job. You just have to make sure you don’t have negative items on your report.

Getting Hired with Negative Credit History

If you do have negative items on your report due to a major medical situation or long term employment, it’s probably wise to preempt the credit report check by future employers. Request your free credit reports today.

Do everything you can to clean up your credit report over the next few weeks and months. Prepare a detailed explanation of your negative credit history: explain in a formal letter what happened, why, and what you are doing to fix it.

Have you ever been rejected for a job based on your credit report? Do you think it’s fair for employers to use a credit report when hiring?

Image by bpsusf

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Last Edited: March 9, 2012 @ 11:54 am
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

7 comments
Squeezer @Personal Finance Success
Squeezer @Personal Finance Success

When I was hired for my job, the employer (fed gov) ran a credit check on me as part of the background process.  Also at my former job (medical research) a credit check was ran as part of the background process due to FISMA regulations.

cash flow mantra
cash flow mantra

I think it can be a good indication of responsibility.  I want someone who has some self discipline working for me and being able to pay bills on time is a very good indicator that can't be faked.

tylerspraul
tylerspraul

I agree - if an employer wants a reliable, long-term employee, why not take a look at how financially responsible they have been in the past, with permission of course.

krantcents
krantcents

My credit report/score is very good.  I think I may get hired because of it.  I was a CFo of companies in my past life.  I think is necessary in any area where money is involved.  Secondly, any area where empployees handle assets. That just about covers everybody.

johnulzheimer
johnulzheimer

@ptmoney Ur next blog should be about the difference btween celebrities pretending to b experts and real experts. @suzeormanshow @daveramsey