First Person: Why Employers Run Credit Checks on Job Applicants

Yahoo Contributor Network

Recently a member of my family completed her masters in organizational psychology and flew several hundred miles across the country to apply for a job. Her school and work history are both impressive, and after the interview she was informed she had the job provided she passed the "credit check." Given her esteemed track record, it made no sense to me that her credit report would be pulled before confirming her employment. I learned that the firm operated a collections division and required assurance that she did not owe money to it though any of its financial services. Happily, she got the job, but it led me to research other reasons why an employer would run credit checks on employees.

Not all employers check your credit. According to a report from the Society for Human Resource Management, only 13% of U.S. companies consistently conduct credit checks on applicants. In view of this statistic, it's safe to assume that when an employer requests a peek at a credit report, they are looking for something specific. Keep in mind that it costs money to pull a credit report, so it has to be important.

Your personal credit matters when your job involves handling financial matters. A credit check is necessary when you will be directly handling other people's cash or accounts. A good report gives your employer the assurance you are trustworthy to take cash from his or her customers. It also shows you ability to oversee and manage corporate assets.

A poor credit report will not automatically dismiss you from the chance to land a job. While it may not demonstrate credit-worthiness in terms of getting a bank loan, employers tend to look at a longer term history to derive something of your ability to be take responsibility and make intelligent decisions. They are aware that financial problems happen in life, so they don't expect you to be perfect 100% of the time. You also need to consider that often a recruiter has not been educated on how to correctly read a credit report so it's mostly meaningless to them.

An employer may have concerns when your report shows you are being sued for collections, since it could result in your wages being garnished. If they see you have monthly payments that can't be handled by the salary they are offering it's a risk for financial exploitation or you simply quitting your job to seek higher wages.

Fix your credit report. It's a good idea to obtain a free copy of your credit report once a year and checking it for errors or items that should be dropped. Your employer may not care to hear about the reasons there are marks against you, so it's better you have them removed if possible. But don't panic - most employers will derive immensely more value from your education and work history than from your personal credit. Your firm handshake and superior credentials will land the job!

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