credit history may impact your job huntCurrently trying to secure a job? Landing a job can be a stressful process, and it’s always important to learn what aspects help determine whether you get hired or not. You may already know that having a polished resume and a personal website could help, but did you know that your credit could affect your chances of getting hired? If you want to know more about how your credit history may impact your job hunt, here’s the lowdown.

How do employers check your credit history?

After extending a job offer to you, employers might undertake a background check, which may include a credit check. Though not all employers do so, one way for employers to do this, after receiving your written consent, is to pull credit reports from credit reporting agencies. The credit reports, produced by credit reporting agencies, serve as records to verify your identity or trustworthiness, and they may provide your personal identifying information (e.g., your name and social security number), credit accounts (e.g., payment history, information about your credit accounts and historical credit accounts), public record (e.g., civil suits and bankruptcies) and collection items. By law, consumer reporting agencies aren’t allowed to report negative information that’s over seven years old, though bankruptcies can be reported for up to 10 years, depending on the type of bankruptcy. As a result, any negative item exceeding these limits shouldn’t be found on your reports.

It should be noted that credit reports pulled by lenders and creditors are not the same as the ones pulled by employers, as employers receive modified versions of your credit reports for employment purposes. More specifically, credit reports that are pulled for employment-related reasons, including hiring and job promotion purposes, look different from those that lenders or creditors might access. For example, Experian, one of the three major credit reporting agencies nationwide, doesn’t include your birth date, account numbers or spouse-related information on employment credit reports, whereas it often includes this information on credit reports provided to lenders. Finally, credit reports that are pulled for employment purposes are usually soft inquiries, meaning that these pulls won’t impact your credit reports or scores.

There are laws that impact credit check processes

Under the Fair Credit Reporting Act (FCRA), employers can access credit reports only when a consumer authorizes, in writing, that the employer can do so, which means you’ll be required to give them permission to check your credit reports. Additionally, under the FCRA, if an employer uses a credit report to deny your application for a job, the employer is required to provide you with the credit reporting agency’s name, address and phone number. If adverse action has been taken against you because of your credit report’s information, you’re allowed a free file disclosure from that consumer reporting agency.

Something else to note is that when it comes to consumer reporting, your location matters, since some states have their own reporting laws. To find out what specific rights you have under your state’s law, it may be best to contact a local consumer protection agency, your state’s consumer protection agency or your state’s Attorney General for more information.

Why do employers check your credit reports?

There are several reasons why employers might check your credit reports. If an employer wants to evaluate your integrity or financial honesty, for example, it’s possible that the employer will assess these traits through a credit report. Employers might also check your credit reports to decrease theft and embezzlement risks. Furthermore, the possibility of negligent hiring liability may incentivize employers to check your credit reports. By reviewing these reports, employers may hope to reduce such a liability.

Contrary to popular belief, employers don’t usually look at your credit scores

While some employers may refer to credit reports, they do not see your credit scores through these reports. And yes – there’s a difference between credit reports and credit scores. Although they are related, it’s beneficial for you to be able to distinguish them from one another. To learn more about the differences between these credit-related items, check out our guide to credits reports and credit scores.

Certain industries pull credit reports for employment purposes more often

Some industries submit inquiries for employment credit reports more than others. Oftentimes, when these kinds of credit reports are pulled, the job candidates are applying for roles in the defense, pharmaceutical, chemical or financial sectors. As you can imagine, roles in these sectors may entail access to sensitive or classified information, so employers in these industries may see the value in reviewing job candidates’ credit reports during hiring processes.

Make sure your credit history may impact your job hunt in beneficial ways

Now that you know how your credit history may impact your job hunt, you can better your chances of securing a job by maintaining an excellent history. Start off by requesting copies of your credit reports through AnnualCreditReport.com, the only government-authorized website for free credit reports. This website allows you to obtain your credit reports from the three major credit reporting agencies (Experian, Equifax, and TransUnion) once every 12 months. Keep in mind that you’ll want to check your reports from all these bureaus. That’s because your credit accounts might not report to the same bureaus, which means your report from each bureau may look different.

If you’ve already checked your credit reports in the past 12 months, you will not be able to get free copies from AnnualCreditReport.com, but there’s another option — sign up for a credit monitoring service. Our top-rated services will not only provide you with all three of your credit reports and scores upon signup, but they will also continue to monitor your credit for the duration of your subscriptions. This means you will be able to stay in the know with your credit, as you’ll be alerted if something is added or changed on your credit reports. Some of these services offer free trials, so if you sign up for one of these services and you’re unhappy with it, you can always cancel your subscription before the trial runs out without paying a dime. Visit our reviews of the best credit monitoring services to see which one is a good fit for you.

Once you review your credit reports, you can have a better awareness of your credit health and catch any credit report errors, helping you to dispute incorrect items on your reports before potential employers see them. To learn more about improving and maintaining your credit, check out our credit monitoring blog.