It may consist of nothing more than a number ranging from 300 to 850, but your credit score can have a significant impact on your life. Mortgage providers use it to determine whether or not a buyer is a suitable candidate for a home loan; utility service providers (e.g. water, gas and electricity) check credit scores to see if a tenant must pay a security deposit; credit card companies use to approve or deny applications – and some employers even base their hiring decisions on an applicant’s credit history.
This begs the question: for what reason does an employer need know a job applicant’s credit history? If an employer notices a string of delinquent accounts, late payments, or collections, he or she may assume it’s reflective of the applicant’s character. Furthermore, the employer may doubt the applicant’s ability to pay his or her mortgage and other bills, which could result in the applicant being kicked of their home and unable to make it to work.
But credit checks for the purpose of hiring decisions are becoming less common in today’s society
According to a survey conducted by the Society for Human Resource Management, 53% of companies said they did not conduct credit checks on job applicants, up from 40% just two years prior. Granted, this survey was somewhat limited, involving a small pool of just 544 randomly selected organizations, but it attests to the changing trends regarding credit checks on job applicants.
Of course, laws regarding the use of credit reports to decide whether or not a job applicant should be hired varies depending on the state and city. Federal law allows employers to base hiring decisions on an applicant’s credit history as long as they obtain the applicant’s written consent beforehand; give the applicant a warning and a copy of the report if the applicant is rejected; and give the applicant an official adverse action notice if the applicant is rejected. However, certain state and city laws may prohibit the use of credit reports in hiring decisions.
Many States Limit the Use of Credit Reports
California, Connecticut, Hawaii, Oregon, Maryland, Washington and Illinois have passed their own laws prohibiting or limiting employers from using applicants’ credit reports. As we discussed in a previous blog post, New York City also passed a city-wide law prohibiting credit reports from being used in hiring decisions, except in the case for law enforcement and financial services.
You can check your credit history for free at AnnualCreditReport.com. According to the Federal Trade Commission (FTC), it’s “the only authorized website for free credit reports.” It allows consumers to pull a credit report from each of the three major credit bureaus – Experian, Transunion and Equifax – once a year. Additional reports can be obtained for a fee.
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