Your credit report contains information about your work history, debt levels and how well you have managed your debt in the past. While it makes sense for credit card companies or loan institutions to perform a credit check, the reasons an employer wants to see this information can be more obscure.
Reasons For Employment-Related Credit Checks
When you first apply for a job, your potential employer might want to check your credit as a way to decide whether you are trustworthy. In the case of jobs that involve handling large sums of money, the presumption is that people with bad credit are more likely to steal from their job.
Some federal and state jobs require a security clearance. A credit check is one way to verify how reliable and trustworthy the potential employee is.
Another reason for pre-employment credit checks is to verify your work history and identity. Your credit report can reassure a potential employer that you haven't padded your resume or left some of your previous jobs off your list of former employers. It also provides verification of your home address and telephone number as well as your legal right to work in the U.S.
Once you are hired, an employer might check your credit when considering whether to promote you to a position with more responsibility. Some employers also run periodic credit checks on employees to determine if anyone is in the company is overextended financially. An employee with a high debt-to-credit ratio might be viewed as more prone to steal from the company.
Your Rights Regarding Employer Credit Checks
An employer or potential employer cannot run a credit check on you without your express permission. Before running the credit check, the employer must have you fill out an authorization form. You must also supply the employer with your social security number in order for them to request your credit report.
In some states, including Washington, Hawaii, Illinois and Oregon, the employer can only request a credit report if your credit history has a direct relation to the job you are applying for.
If the company makes the decision not to hire or promote you based on information in your credit report, they are required to inform you of this. A denial of employment based on your credit report entitles you to one free copy of that report, above and beyond the normal one free report per year that everyone is legally entitled to.
