Credit and Job Application

Credit and Job Applications

Everything You Need to Know About Credit and Applying for New Job

If you have filled out a job application in the 21st century, the potential employer has likely requested your permission to look at your credit as part of their background check. Many job applicants wonder what their credit background has to do with their job qualifications.

Why do many employers look at the credit of job applicants as part of a background check?

Many prospective employers review an applicant’s credit report as a tool to identify concerns regarding potential employee theft and blackmail. Although credit does not evaluate a worker’s job or academic qualifications, it may indicate the possibility of lower worker productivity due to worries over personal finance issues.

Who Uses What and When

Industries that require credit checks include law enforcement, banking and finance, and government agencies. If a job requires any level of security clearance, access to financial data, or management of privacy and sensitive information, you should expect the employer’s background research on prospective employees to include information from your credit report.

Many consumers and prospective employees mistakenly believe a job interviewer will have access to their credit ratings (e.g. FICO score) during the hiring process. The three consumer reporting agencies, (aka credit bureaus) have publicly stated they do not provide credit scores to employers.

Moreover, prospective employers have limitations as to which data they can even view on your credit report. Just as federal law generally prohibits employers from asking job applicants about their race, their marital status, and their religion, companies providing credit reports as part of the background check will remove potentially discriminatory information before delivery to the employer. Specifically, the employer will not see any information that indicates your marital status.

Employers do not usually have a copy of your credit report during an interview. Like the rest of the background check, the credit report information typically becomes available after the first or second interview but before the employer makes the final hiring decision. It will include account names and balances but not account numbers. It will describe the types of accounts (e.g. home and car loans, credit cards, retail store cards, collections, etc.) and your history of on-time or late payments. It will also show any bankruptcy you may have filed in the past ten years. It may also include a list of previous employers, although just information is notoriously under-reported or long out-of-date.

What Employers Learn

Many consumers feel frustrated at the idea of having their credit report play a role in the hiring process. After all, what does your credit report say about your qualifications? Not much, really.

So why would employers pay to review your credit report before offering you a job? After all, federal law prohibits the access and use of your credit except for legitimate business purposes. What legitimate business purpose does your credit report play in the hiring process? Several, as it turns out.

The first reason for checking your credit involves the employer’s protection. If the prospective employee will have access to sensitive information, financial data, or even high-security materials, the employer will take advantage of any tool that might minimize the possibility of having their employees blackmailed or lured into data hacking situations.

A more prosaic reason for checking your credit report has to do with your day-to-day work productivity. If an employer notes multiple active collection accounts on your credit report or even a single, large, recent collection account, the employer would not be unreasonable to assume that the collection agencies will frequently attempt to call the new employee at work, decreasing that employee’s productivity. Additionally, distressed accounts on your credit report (e.g. collections, accounts with late payments, and accounts with maxed-out balances) typically create stress for the consumer, again leading to lower productivity on the job.

Conspiracy Theories

For conspiracy theorists who discount the credit bureaus’ statements that they don’t provide employers with credit scores, you can take comfort in the fact that the vast majority of employers know no more about credit scores than you do. Interpreting the meaning of a credit score goes far beyond the idea of “good scores” and “bad scores.” Lenders, for whom FICO-created credit scores, require expensive and highly developed, proprietary software to match their mission and risk tolerance to consumer credit scores. Employers show no interest in spending hundreds of thousands of dollars to develop such programs as a secondary tool in the hiring process.

While conspiracies fail to account for the many safeguards in place to the consumer’s personal information and what becomes available to the prospective employer, such safeguards cannot control how an employer reacts to the available credit report information.

For example, although the law prohibits age discrimination, interviewers and prospective employers have access to the applicant’s date of birth, usually on both the application and on the credit report.

Furthermore, regardless of the experience, you include on your resume or job application, the employer may jump to other conclusions about you if they see employers listed on your credit report that you have not included on your application materials.

Additionally, if the employer sees multiple addresses on your credit report, they may assume a level of instability in your life that makes them nervous to hire you. Finally, while your account numbers are not included on your credit report, employers may react differently to an applicant who has a Home Depot credit card on their credit report versus someone who has an open Victoria’s Secret account.

These are not conspiracies, mind you, in that they do not involve someone or some organization attempting to hide information in order to carry out illegal or unethical activities. Instead, these are usually real-life, individual reactions based on personal experience and cultural stereotypes. Regardless, we must recognize the potential for abuse on several levels.

Check Your Credit Before You Apply for a Job

If you plan to apply for new employment in the coming months, you likely expect to spend an hour or more updating your resume. You should also plan to pull your credit report as part of your job application preparation process. You have the right to pull your credit reports for free from each of the three main credit bureaus every twelve months. If you have not done so in the previous year, pull your three credit reports and review them for accuracy.

If you have been unemployed and plan to apply for a job, you can still get free credit reports directly through each of the three main credit bureaus Equifax., Experian, and TransUnion even if you have already pulled your free reports from AnnualCreditReport.com in the past twelve months.

Once you have your credit report, go through the following steps to discover any potentially damaging errors it may contain:

  • Is your name spelled correctly?

  • Does the report list any names you do not recognize or that identify family members? This may indicate errors or actual identity theft.

  • Does the report list any addresses you do not recognize or those of family members? Like incorrect names, this may indicate errors or identity theft.

  • Ensure the report lists your correct social security number. Additional or erroneous numbers indicate potential identity theft.

  • Look through the list of your accounts and confirm they belong to you. If not, dispute them (steps listed in the next section)

  • For each account you recognize, check the accuracy of the account’s status (open vs. closed, paid as agreed vs. charged off), the account’s balance (balances are typically updated just once a month), the account’s payment history (on-time payments vs. late payments), etc.

  • Look at the list of organizations under the “Inquiries” section. You should recognize creditors and service providers under the “Hard Inquiries” or “Regular Inquiries” section. If you don’t, it might be a sign of identity theft. The “Promotional” or “Account Review” inquiries list organizations that send you credit card or insurance offers or that you already have a business relationship.

  • Check the public records section. You should only find here bankruptcies you have filed recently (within the past 10 years for a Chapter 7 and the past 7 years for a Chapter 13). The credit bureaus stopped collecting information on judgments and tax liens for this section back in 2018. If you find these on your report, dispute them to have them removed.

Dispute and Clean up Credit Errors

You can best prepare your credit report for the job application process by ensuring it contains accurate information, whether it is positive or negative. For negative information, review the recommendations in the final section below about preparing for questions about such data.

While you can’t dispute all information on your credit report (e.g. some bureaus don’t allow dispute of addresses), you can follow these steps to dispute inaccurate details:

  1. Access the error dispute tool for each consumer reporting agency (CRA) whose report contains an error, following the links below:

    Equifax

    Experian

    TransUnion

  2. Be prepared to provide your login information if you have registered with the CRA before. Otherwise, you will need to register for a free account using an email, username, and password. They may also ask you for and require your social security number.

  3. After logging in, the CRA will dispute your credit report. Navigate to and click on the item you plan to dispute.

  4. Each CRA handles disputes a bit differently, but generally, you will need to identify the reasons you want to dispute the item. Options will appear in a drop-down or a checkbox format and include reasons such as “Does not belong to me,” “Believe it is fraudulent,” and “Discharged in bankruptcy.”

  5. After identifying the reasons you are disputing the item, you typically have the option to add a brief explanation of the error in a text box. The CRAs limit the length of your description, so keep it brief.

  6. At this point, you may either submit your dispute or navigate to and dispute an additional item.

  7. After submitting your dispute, the CRA forwards pretty much immediately your information to the creditor in question. That creditor then has 30 days to respond, agreeing with or arguing against your dispute. If they do not respond, the CRA processes your dispute automatically as you have requested.

  8. If the creditor disagrees with your dispute, you must then gather your documentation and contact the creditor directly. Keep copies (paper or electronic) of all correspondence and communications.

Add a Statement to Your Credit Report

If you find information on your credit report you disagree with, in addition to disputing it, you might consider adding a consumer statement to your credit report. This statement has no effect on your credit rating, but any human eyes viewing your report may notice your statement and take it into account, such as a potential employer.

Be Prepared to Answer Difficult Questions about Your Credit

As you prepare for a job interview that may involve your credit report, you should consider how to address negative but accurate information on your credit report. Inevitably, it is better to be upfront and honest with an employer about such information than hope they don’t see it when they likely will.

Negative information might include bankruptcies, late payments, maxed out or over-limit accounts, large balances, and collection accounts. Consider addressing these issues with the prospective employer ahead of time, perhaps sharing something like the following during your interview: “I noticed you requested permission to view my credit as part of the application process. Could I give you a heads up of what you might see there and why?”

If the negative item resulted from forces beyond your control (medical emergencies and accidents, for example), just tell it like it is and how you are addressing the challenge.

If the negative item resulted from your own consumer decisions, such as overspending or lack of discipline with credit cards, be honest. Then consider sharing what you learned from the experience and what your plan is to address the challenge. Be sure to have a plan in place, whether you are working directly with the creditor to repay the debt, working with a credit counseling agency like Money Fit, or dealing with it in some other way.

Better preparation means you will make a better impression on your prospective employer. After all, isn’t that the purpose of your application and interview?

Related Questions

Can prospective employers see your credit score? No, potential employers may review certain information from your credit history as part of their background check, but they do not see your credit score. Employer credit checks prohibit access to your score and your marital status, among other information.

What can you do if a potential employer didn’t hire you because of your poor credit? By law, the potential employer must first furnish you with a notification of potential adverse employment action before making the final decision. This should give you a short period during which you can check your credit report for errors and/or explain to the potential employer the negative items.

About the Author

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Client Credit Report Authorization

You hereby authorize and instruct Debt Reduction Services, Inc. (DRS, dba Money Fit by DRS) and/or its assigned agents to:
  • Obtain and review your credit report, and
  • Request verifications of your income and rental history, and any other information deemed necessary for improving your housing situation (for example, verifying your annual property tax obligations and homeowner’s insurance fees)
Your credit report will be obtained from a credit reporting agency chosen by DRS. You understand and agree that DRS intends to use the credit report evaluate your financial readiness to purchase or rent a home and/or to engage in post-purchase counseling activities and not to grant credit. You understand you may ask any questions pertaining to your credit report. However, while DRS will review the information with you, the company is not able to furnish you with a copy of your credit profile. You hereby authorize DRS to share your information from your credit report and any information that you provided (including any computations and assessments produced) with the entities listed below to help DRS determine your viable financial options.
  • Banks
  • Counseling Agencies
  • Debt Collectors
  • Landlords
  • Lenders
  • Mortgage Servicers
  • Property Management Companies
  • Public Housing Authorities
  • Social Service Agencies
Entities such as mortgage lenders and/or counseling agencies may contact your DRS counselor to evaluate the options for which you may be eligible. In connection with such evaluation, you authorize the credit reporting and/or financial agencies to release information and cooperate with your DRS counselor. No information will be discussed about you with entities not directly involved in your efforts to improve your housing situation. You hereby authorize the release of your information to program monitoring organizations of DRS, including but not limited to, Federal, State, and nonprofit partners for program review, monitoring, auditing, research, and/or oversight purposes. In addition, you authorize DRS to have your credit report pulled two additional times to conduct program evaluations. You also agree to keep DRS informed of any changes in address, telephone number, job status, marital status, or other conditions which may affect your eligibility for a program you have applied for or a counseling service that you are seeking. Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Client Privacy, Data Security, and Client Rights Policy

NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. This notice explains our online information practices and how we use and maintain your information to conduct our financial education and credit counseling sessions and to fulfill information and question requests. This privacy policy complies with federal laws and regulations.

To provide our financial education and credit counseling services, we collect nonpublic personal information about you as follows: 1) Information we receive from you, 2) Information about your transactions with us or others, and 3) Information we receive from your creditors or a consumer reporting agency. We do not share this information with outside parties.

We use non-identifying and aggregate information to better design our website and services, but we do not disclose anything that could be used to identify you as an individual.

You hereby authorize DRS, when necessary, to share your nonpublic personal, financial, credit, and any information that you provided (including any computations and assessments produced) with the following entities in order to help DRS provide you with appropriate counseling or guide you to appropriate services: third parties such as government agencies, your lender(s), your creditor(s), and nonprofit housing-related and other financial agencies as permitted by law, including the U.S. Department of Housing and Urban Development.

To prevent unauthorized access, maintain data accuracy, and ensure the correct use of information, we have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect online. We limit access to your nonpublic personal information to our employees, contractors and agents who need such access to provide products or services to you or for other legitimate business purposes.

Debt Reduction Services, Inc. complies with the privacy requirements set forth in the HUD housing counseling agency handbook 7610.1 (05/2010), including the sections 2-2 Mc, 3-1 H(2), 3-3, 5-3 F, and Attachment A.5. At all times, we will comply with all additional laws and regulations to which we are subject regarding the collection, use, and disclosure of individually identifiable information.

  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

Please refer to DebtReductionServices.org for details of our services.

  1. Limits: Our services are limited to our normal weekday business hours. We do not provide individual counseling or education services after hours or on weekends, although our education courses are available 24/7.
  2. Fees: We do not charge fees for our financial management counseling and education. However, if you use them, you may have to pay for our Debt Management Program, Student Loan Counseling, Bankruptcy Certificate Services or certain financial education courses (homebuyer education, rental topics, fair housing, predatory lending, and post-purchase-non-delinquency including home maintenance and/or financial management for homeowners).
  3. Records: We maintain records of the services you receive, including notes about your progress or other relevant information to your work with us. You have the right to access and view your records by making a request to your counselor.
  4. Confidentiality: We respect your privacy and offer our services in confidence with the understanding that we may share such information with auditors and government regulators. Certain laws or situations may also lead to disclosing confidential issues, such as those involving potential child abuse or neglect, threats to harm self or others, or court subpoenas.
  5. Refusal of Services: You have the right to refuse services without any penalty or loss.
  6. Disclosure of Policies and Practices: You will be provided our agency disclosure statement.
  7. Sharing of Information: Sometimes we will need to contact other agencies or we may need to share your information, including your records, with other agencies or with regulators. We will do this only if you sign this form that gives us permission except for limited reasons; please see # 5 above for examples of such situations.
  8. Other: You have the right to be treated with respect by our staff, and we expect the same from you in return. We encourage you to always ask questions if something is not clear. We also encouraged you to express your thoughts and advocate throughout our services.

You acknowledge that this authorization will remain in effect for the duration of time that DRS serves as your housing counselor or financial education provider. You also acknowledge that should you wish to terminate this authorization, you will notify DRS in writing.

Disclosure  Statement

NOTE: If you have an impairment, disability, language barrier, or otherwise require an alternative means of completing this form or accessing information about our counseling services, please communicate with your DRS representative about arranging alternative accommodations.

Program Disclosure Form

Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).