We use credit reports in varied aspects of our lives from securing credit cards, to getting a loan, at times renting a home and even getting a certain type of job. Credit history has an important part to play in our financial life. Though it is natural that an excellent credit score getting can get you a car or house loan very easily, most people, however, have the notion that the detail that it shows can be a determining factor for hiring by many employers. It is a myth although and in this blog we will try to debunk these misconceptions.
The Common Misconception
The information provided by your credit file like the history of how you pay your debt can truly affect your ability to avail the best interest rate on a loan. It can also be used to track your insurance credit score along with other information like your driving record or your claims history. Your credit can also determine what you pay for a tour vehicle or home insurance.
Probably you have also heard or read that a bad credit history or score might stand in the way of getting hired and on this aspect some clarification is needed. People from major credit bureaus like Equifax, Experian, TransUnion and FICO, the company that created the model of credit-scoring used by the majority of lenders, were interviewed on this aspect. In such interviews they have admitted that people with low credit score can face difficulty in being hired.
In order have access to your credit history; your employers first have to seek permission from you. It will be your decision to grant then the access and even if you do that they will get to see a dressed-down version of your credit record that lenders typically see. And most important of all, these reports have no mention of your credit score. So you can sum up that your credit history and not your credit score has a part to play into getting you hired.
The record which the credit bureau keeps on you contains the information of how you have handled your debts and bill payments. This information is then used to generate your credit scores, a measure that shows how much of a financial risk you might be at.
The Society for Human Resource Management feeling concerned about the use of a candidate’s credit history ramped up a report in 2012. The report clearly stated that though in some critical hiring decisions, the employers at times taking people’s credit report into account. But the difference between “credit report” and “credit score” are often switched, and hence this misconception boomed. So by now, it is very clear that an employer cannot see your credit score along with your credit report.
What are Credit Checks in Employment Verification?
In respect to employment verification, a credit report is designed to give recruiter information that is needed to assist an organization in making a safe and right hiring decision. The report provides a comprehensive credit history and public record information, and some other items that are not typically included in job applications filled up by the candidates. Employment credit checks thus can provide the employer an insight on the candidate’s financial responsibility and stability. Credit checks gave also proven to be a useful tool for preventing the potential frauds, theft and various other white-collar crimes. Employment credit checks usually include the following identifying information:
- Full Name
- Previous Names and Addresses
- Payment History
According to the common misconception, an employment credit check provides the candidate’s credit score to the employer is not true as we have explained it above. The credit report that is provided by a Consumer Reporting Agency gives a completely unbiased account of a prospective candidate’s financial background bit maintaining compliance with the Fair Credit Reporting Act (FCRA). Employment credit check further testifies the candidate’s current and previous addresses, tax returns, previous employment information, blocked personal identity information like social security number, birth date, and bank account numbers and automatically generates and send a public record notification letter as mandated by the regulation of FCRA.
Laws that limit the Use of Credit Reports for Employment
Most states do not allow employers to run credit reports on prospective candidates for hiring purposes. However, there are some states and cities including Hawaii, Oregon, Connecticut, California, Colorado, New York City, Washington, Illinois, Maryland, Vermont, Nevada, Washington D.C., who restricted the running or use of credit reports based on the position and industry. There is also a proposed bill in 17 other states as well as a federal amendment (HR 3149) which mandates limiting or prohibiting the use of credit reports for the employment purposes. Employers must be knowledgeable in these laws when running credit checks on their candidates.
Credit Checks Are Not Essential For All
Credit checks are not mandatorily performed on all candidates. They are only necessary for companies or positions where a candidate will have managerial, accounting, financial or check-writing accountabilities. Anyways while performing a credit check, the company must have a permitted purpose. The candidate’s permission is also necessary to run the report through a disclosure authorization form. The information that you provided for a criminal record check such as full name, social security number, birthday, any known pseudonyms, current, and past addresses and driver’s license number can be used to run the employee credit check. The employer is required to offer a copy of the credit report and a written summary of the consumer’s rights along with the report. Candidates also can dispute the findings of the credit report if they find an error.
It is important to be informed about the process and what information you need to provide for the background check. Remember to read the consent form carefully before you sign it. Providing the correct information at the time of consent will help to speed up the background check process.
Regulations for Conducting Background Check
As a reminder, third-party background screening companies are regulated by federal, state and local laws. At the federal level, background checks are regulated by the Fair Credit Reporting Act (FCRA) and the Equal Employment Opportunity Commission (EEOC) guidelines. One requirement of the FCRA is that a company must notify the candidate that they will be performing a background check. The notice will explain that the results of the background check will be used for hiring, promotion or retention. After explaining the intent of performing a background check, employers must receive consent (either on paper or online) from a job candidate to run a background check and that the results will be used in making hiring decisions.
There are many aspects to a background screen from criminal record checks to employment verifications to credit checks. Each company will require different checks for the positions that they need to fill. Understanding what information you need to be prepared for the background check will help the turnaround time and put you a step ahead of other candidates.