Do Employers Use Credit Scores?

In today’s world, credit scores are essential to a person’s financial life. Banks and other financial institutions use credit scores to determine whether a person qualifies for a loan or credit card.

But do employers use credit scores when deciding to hire someone? The short answer is no. However, employers may consider several other factors when evaluating a candidate’s credit history.

Why do Employers Check Credit History?

While employers do not check credit scores, they may check a candidate’s credit history. Employers check credit history primarily to verify the candidate’s identity.

When a person applies for a job, they provide their personal information, including their name, address, and social security number.

By checking the credit history, employers can verify the candidate’s identity and ensure that there are no discrepancies in the information provided.

Another reason employers check credit history is to evaluate a candidate’s level of responsibility and trustworthiness. Employers may view a candidate’s credit history as an indicator of how well the candidate manages their finances.

A poor credit history may suggest that the candidate is not responsible with money, which could be a red flag for employers.

What Information Do Employers Look for in a Credit Report?

When employers check a candidate’s credit history, they do not see their credit score. Instead, they receive a credit report, which provides a detailed summary of the candidate’s credit history. Employers look for the following information:

  1. Payment history: Employers want to see that the candidate pays their bills on time and is not delinquent on any accounts.
  2. Outstanding debts: Employers may view high levels of debt negatively, as it suggests that the candidate may be unable to manage their finances effectively.
  3. Bankruptcy: A bankruptcy on the credit report may be a red flag for employers, as it suggests that the candidate may not be financially responsible.
  4. Collections: Employers may view collections on the credit report negatively, as it suggests that the candidate may be unable to manage their debts effectively.

Are There Laws That Regulate Credit Checks?

Yes, there are laws in place that regulate credit checks by employers. The Fair Credit Reporting Act (FCRA) is a federal law that governs employers’ use of credit reports.

Under the FCRA, employers must obtain written permission from the candidate before conducting a credit check.

Employers must also inform the candidate if they are denied employment based on information in the credit report.

Conclusion

While employers do not use credit scores when hiring, they may check a candidate’s credit history.

Employers check credit history to verify a candidate’s identity and evaluate their level of responsibility and trustworthiness.

The information employers look for in a credit report includes payment history, outstanding debts, bankruptcy, and collections. The FCRA regulates credit checks by employers, and employers must obtain written permission from the candidate before conducting a credit check.

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