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