Credit scores play a crucial role in almost all aspects of life. Whether you are looking to take out a mortgage for your dream home, get a loan for a new car, or rent an apartment, your credit score can affect your eligibility.
Many of us seem to believe that employers are allowed to check your credit scores. You may have been told that employers can ask you to sign a document that would allow them to check your credit scores. However, employers are not allowed to view your credit score.
In most states, however, employers can ask to view an applicant’s credit report. A credit report varies from a credit score drastically.
A credit score is a 3 digit number that an algorithm produces. The 3 major credit bureaus: Equifax, Experian, and TransUnion produce these scores using the FICO model. The algorithm uses items from your credit report to calculate your overall credit score. Potential lenders can use to see if you are a trustworthy borrower.
The credit bureaus can produce a score using the FICO model and VantageScore models.
A credit report is literally just a report. Essentially, it is a history or log of all your credit-related activity. A credit report will show your past and current accounts, how much you owe, and whether you have been making on-time payments. A credit report also shows if you have had any delinquencies on payments, any collection efforts, and bankruptcies within the past 7 years.
Why Employers Check Credit Reports
Some employers, especially those in the financial sectors, look for employees who have a certain degree of trustworthiness when it comes to their own financial habits. It could look bad for a financial company to hire a person who has a record of multiple bankruptcies.
When an employer asks to check your credit report, they are essentially trying to get a better understanding of who you are. Various defense and pharmaceutical companies will also attempt to check your credit report.
What Rights do I Have?
As a potential employee, your employer must ask for your consent to check your credit report. There will be an entirely separate document for you to sign if an employer asks for your credit report.
All in all, depending on your industry, there is a chance that an employer will ask to view your credit report. If you know that you will be asked to sign an authorization for your credit report, try and have any errors removed beforehand. You can always file a dispute with the report and you are required to receive a response within 30 days of filing a dispute.