Why Do Employers Run Credit Checks and What Do They See?

Why Do Employers Run Credit Checks and What Do They See?

By Tricia O'Connor

Integrity. Stability. Trustworthiness.

All terrific attributes employers look for in job candidates. But can an employer really determine if you possess these qualities from an interview alone?

No.

That’s why many employers will run a credit check on you.

But what can employers really see on your credit report, and how does that influence their decision making?

EBI explains it here.

What are Credit Checks?

A pre-employment background check is a critical piece of the hiring process. Most background checks consist of criminal history, education, previous employment verifications, and reference checks.

Credit reports are considered by many to be an indication of a candidate’s integrity, stability, and trustworthiness.

Credit checks for employment purposes are typically conducted through one or more of the three major U.S. credit bureaus (Experian, Equifax, and Transunion). Employment credit checks don’t include a credit score, nor do they count as a formal inquiry against your credit report.

Credit Checks = Last Line of Defense

Certain industries rely heavily on credit reports when making a hiring decision. If you are applying for a job in banking, finance, security, public safety, or pharmaceuticals, there is a strong chance you’ll be asked to undergo a credit check. You must give written consent for the employer (or its contracted screening company, like EBI) to run the credit check so you’ll know ahead of time they’ll be looking at your finances. 

Some employers in these industries think signs of financial insecurity or distress may make a candidate predisposed to fraud, theft, or other deceptions. However, companies usually pull a credit check late in the hiring process which can give you time to explain any negative entries on your report.

What’s Included on an Employment Credit Report

The information included on your credit report includes:

  • Public record information:
    • Bankruptcies
    • Tax liens
    • Civil judgments
    • Payment history
    • Foreclosures
  • The number of derogatory or unpaid accounts that are in collection
  • The number of open accounts:
    • Loans
    • Credit cards (including late or missed payments)
    • Mortgages

Employers will often conduct a 7-year credit search and a 10-year bankruptcy search, both searches follow the time frame guidelines allowable by the Fair Credit Reporting Act (FCRA).

Your credit report does not include information that could violate Equal Employment Opportunity Commission (EEOC) regulations such as your birth date or marital status.

Credit Checks Limitations

Credit checks are an important component of employment screening for some jobs. But discretion should be used. The use of credit information in employment screening is limited by location or to specific job positions.

Several states and cities have imposed limitations on credit checks and have enacted laws and ordinances restricting the use of a candidate’s credit history. In those locations, most often the use of credit is prohibited except for specific positions, such as law enforcement, corporate executives, or those with fiduciary responsibilities. Check your state’s labor department or your local jurisdiction to find out what laws apply in your area.

EBI offers access to FCRA compliant employment credit reports in a secure and confidential manner.

Safer, Smarter Screening with EBI

At EBI, we understand how intimidating the background screening process can be. It’s why we dedicate so much time and effort into breaking down background screening basics to help improve the candidate experience for job seekers and employers alike.

EBI is widely known for our safer and smarter background checks backed by our industry-leading technology and award-winning customer service. Our Compliance Library is kept up to date with modern screening information, including credit check laws, and all EBI clients have full access to it. We are also the ONLY screening firm to produce weekly news reports with our Screening News Network.

If you’re serious about improving your candidate experience, contact us today.

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About the Author

Tricia O'Connor

Tricia O'Connor

Writer. Digital marketer. Storyteller. An award-winning writer and editor, Tricia O'Connor is the Marketing Content Manager at EBI. Tricia worked as a broadcast and print journalist for nearly two decades writing and producing programming for high-profile networks like ESPN Radio, History Channel, and Hallmark Channel, as well as contributing editorial work to publications nationwide. Tricia joined the EBI marketing team in 2019 and is responsible for content strategy, development, and engagement. Tricia earned a master's degree in journalism from the Medill School of Journalism at Northwestern University and is a proud undergraduate alumna of Wheaton College in Massachusetts.

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