Did You Know: Employers cannot check your credit reports without your permission?

June 1, 2018

One of the
hot button, yet widely misunderstood, issues regarding credit reporting
is use of information in a consumer’s credit files by potential
employers who are vetting a prospective employee.

Firstly,
employers cannot use credit scores. With written authorization from the
prospective employee, employers can view and use some information in a
person’s credit file, which is a large and important distinction. For
background purposes, a credit score is typically a three-digit number
that is an evaluation of how likely you are to repay your debts. The
credit score is calculated based on how U.S. consumers have historically
managed their debts, and is based on credit information provided by
lenders to — and maintained by — the three national credit reporting
companies, Equifax, Experian and TransUnion. The credit score is not in
any way a determination of whether a person will be a good or bad
employee, which is why they are not used in employment decisions.

The
Consumer Data Industry Association estimates that among companies that
utilize background checks in the hiring process, 15 percent of
candidates have their credit files checked.

This is counted as a “soft inquiry” so there is no risk of the credit check impacting your credit score.

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