Credit Checks: What Employers and New Hires Need to Know

There are many reasons to get in touch with a private investigator near Fort Mill, SC. One of the most frequent request Barefoot Professional Investigators receives is for employment background checks, as more and more employers take advantage of the benefits they provide. While we often think of criminal background checks as the backbone of these investigations, that’s not all that’s covered; a credit check can be just as important, especially since most individuals have a clean criminal record. Whether you’re considering a credit check or you’re about to be on the receiving end of one, there are some things you should know.


Why Employers Check Credit

There are many reasons to check credit as part of a pre-employment background check, but three reasons top the list.


  • A history of late payments tends to speak to poor money habits, bad organization, and a habit of breaking agreements
  • High credit utilization or high debt can be an indication of financial trouble; this, in turn, correlates to an increased chance of fraud or theft
  • Financial mismanagement, in general, is viewed as incompatible with jobs that handle high volumes of money or sensitive personal information


What a Pre-Employment Credit Check Uncovers

The credit report pulled by an employer isn’t the same one that’s pulled when you apply for a car loan, a mortgage, or a line of credit. That’s because some information contained in a standard credit report would violate EEOC rules if it was disclosed to an employer, including your age or marital status. Employers also won’t find out account numbers or your actual credit scores. Instead, items like debt utilization (the ratio of credit used to available credit), amounts owed, and frequency of late payments will be visible.


Common Pre-Employment Credit Report Questions

Employers and prospective hires usually have questions about the process. Let’s address a few of the most common.


Is this going to affect my credit score?

No. Credit reports are regarded as either a “hard inquiry” (information accessed for a loan or line of credit) or a soft inquiry, which is more for informational purposes (used for background checks, but also for the credit offers that businesses and individuals often receive). Because this falls into the latter category, it won’t hurt your credit.


What are an employer’s rights and responsibilities?

Pre-employment credit checks are illegal in 10 states and a handful of other jurisdictions; as of this writing, they’re perfectly legal in the Carolinas. But you still have responsibilities as an employer or HR manager, and rights as a prospective hire. 

  • If you’re an employer, you have a responsibility under the Fair Credit Reporting Act to obtain written permission for a credit check
  • If an applicant will be rejected in whole or in part based on their credit check, they must be notified in writing, accompanied by a pre-adverse action notice, a summary of applicant’s rights, and a copy of the report used
  • Ample time must be given (three to five business days at a minimum) to allow a new hire to explain their record and any red flags
  • An after-action notice must also be sent, which includes the name of the reporting agency and its contact information as well as an explanation that the rejected hire has 60 days to obtain their own copy


As an applicant, how can I protect myself?

There are a few steps to take if you’re applying for a job where your credit might come into play.

  • Keep your credit utilization low — 30% or less of your available credit is a good rule of thumb
  • Keep all bills current
  • Sign up for credit monitoring
  • Read and understand your credit report — it’ll help you in more ways than one

For employment background investigations near Fort Mill, SC, get in touch with Barefoot Professional Investigations today!


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