Why do jobs check credit

When doing credit checks, the employer must:. The Office of the Privacy Commissioner has a guide to the Privacy Act for employers and employees external link , which sets out when employers may ask for a credit check.

Citizens Advice Bureau external link has some useful information on credit checks and records. Credit checks Employers may do credit checks of an applicant only if there is significant financial risk such as dealing with accounts or financial administration, and the short-listed employee has consented. Workplace policies What are workplace policies? Your credit report is a chronicle of your financial history, including the loan and credit card accounts you've applied for and opened, how long you've had them, and whether you've made payments on time.

Financial institutions use this information to determine whether you can be trusted to repay loans or pay credit card bills as required.

It's most common to undergo a credit check as part of a job application if you're an aspiring manager or you'll deal with finances or confidential information in the role. You could also be asked to undergo a credit check if you're being considered for a promotion. Employers use credit checks to gauge your trustworthiness and aptitude at managing money. A hiring committee may think employees who can skillfully oversee their own finances would do the same for high-stakes projects at work.

Companies that run credit checks see a limited version of your credit report. It includes personal information to verify your identity with the exception of your birth date ; your Social Security number; and loan and credit card accounts, including payment history and whether any accounts are in collections.

It won't include specific account numbers or information about your spouse. Employers who run credit checks cannot see your credit score. The report they receive includes information that contributes to your score, like payment history, and frequent late payments could be a cause for concern. But the three-digit credit number is not included. The screening itself also won't make an impact on your credit score. That's because a credit check is considered a soft inquiry.

Credit reporting agencies differentiate this type of query from a hard inquiry, which occurs when you apply for a loan or credit card. A soft inquiry doesn't involve a request for credit, so it's not a potential red flag for lenders the way several hard inquiries in a short time could be. In most states, it is possible for an employer to decline to hire you due to your credit history. It can be the sole reason for the rejection, or a single contributing factor among many. Several states limit employers' ability to use credit checks when making hiring decisions, however.

Delaware restricts public employers only from incorporating credit checks into employment decisions. Some cities have passed laws too: New York City and Chicago, for instance, prohibit employer credit checks.

For more information on your state's laws, visit the website for its office of labor. If your employer does check your credit history, it will likely take many other elements of your application under consideration too. It will evaluate factors like the relevance of your previous experience, your educational background and references from within and outside the company.

Employers must comply with regulations in the Fair Credit Reporting Act when conducting an employment background screening, which can include checking your credit. They must do the following:. To avoid a surprise when an employer checks your credit, get familiar with your financial history beforehand by checking your credit report for free from Experian.

You're also entitled to one free report per year from each of the three credit reporting agencies—Equifax, Experian and TransUnion—which you can access on AnnualCreditReport. Make sure all the information is correct, including identifying information like your name and address, the accounts listed, and your payment history.

In Canada this information comes mainly from two suppliers. One of these is Equifax. TransUnion is the other. That includes more than 21 million of us. Mostly a list of your loans, mortgages and credit card accounts. However details of each item you purchased via credit card are not available to the reporting agencies or employers.

Also disclosed are any missed payments, delinquencies, bankruptcies or consumer proposals, judgments against you, or liens on your property. The trend in Canada is that more employers are doing a credit check for employment.

This is the opposite of the U. Expect a credit check if you work in the financial sector.