Will an Employer Credit Check Hurt Your Score?

credit score apply for jobWe recently received this question on the Credit.com blog on the subject of employer credit checks:

Why is your credit score affected negatively when you apply for a job and the background check is done?

When you apply for a job, it’s not uncommon for employers to request a credit or background check. This is especially true with jobs that require you to work with money or sensitive financial/security information. And considering the important role credit plays in our society, much less our individual financial lives, worrying about the impact of inquires on your credit score is completely understandable. In this case, however, you can rest a little easier because credit checks for employment screening purposes won’t impact your credit score in any way whatsoever. When it comes to your credit score, it’s the type of inquiry that matters.

Employment Inquiries

Credit checks for employment purposes are considered “soft” inquiries, which are ignored in your credit score calculation. Hard inquiries, those that are a result of an application for credit or other type of service (phone, utility, cable, etc.), show that you are actively searching for credit. These are the inquiries you need to worry about, they’re the ones that count. (In fact, the only person who can see soft inquiries is you, when you access or pull your own credit reports.) Too many inquiries in a short period of time will negatively impact your score. But the good news is that inquiries — while reported in your credit reports for two years — only count towards your credit score for the first 12 months.

The Myth: Credit Scores & Employment Screening

Our reader’s question brings up an important subject that is often misrepresented and grossly misunderstood: the use of credit scores by employers for employment screening purposes. With how often this myth is perpetuated by the news media, celebrity personal finance experts, and even government officials and legislators, it’s easy to understand why there’s so much confusion around the subject. The reason for the confusion? It all revolves around the common misconception that credit reports and credit scores are one and the same. They are not.

Employer’s Right to Access Your Credit Reports

In recent years, some states have passed legislation that limits when employers can use credit reports but under Federal law, employers are legally within their rights to use credit report data for employment hiring and screening purposes. Under the Fair Credit Reporting Act, employers have the right to access your credit report information for employment screening purposes. The key word here is “credit report.” Before they can do so, however, the potential or current employer must first get prior written authorization — from you.

Employer Credit Checks: Scores Not Included

How many times have you read or heard someone on the news mention something to the effect of “your credit scores impact how much you pay for car loans, mortgage loans, rent deposits, utility deposits, insurance premiums — and can even impact your ability to get a job”? Well, they’re right about all of it except your ability to get a job. Your credit reports may impact your ability to get a job, but your credit scores are never seen by your employers. In fact, credit reports sold to employers are specifically designed for employment screening purposes — and unlike credit reports sold to lenders, these reports do not contain credit scores.

Bottom Line

The use of credit scores for employment screening purposes is a myth. But remember, the truth is: your credit reports may cost you a job, but your credit scores will NOT.

For an entertaining look at exactly how often the media, personal finance experts and government officials get it wrong, here’s an eight-minute video compilation that is well worth the watch:

*Video compilation courtesy of Greg Fisher, owner of creditscoring.com.

    Get everything you need to master your credit today.
    Get started for free

    You Might Also Like

    is experian accurate
    Experian is a credit reporting agency. It also offers consumer cr... Read More

    March 7, 2023

    Credit Score

    A woman sits on a couch with her laptop in her lap.
    Do you keep a close eye on your personal finances? Or maybe you... Read More

    January 4, 2021

    Credit Score

    A man sits at a table with his laptop and a notebook, talking on his phone.
    If you’re serious about your credit score, you need to pay your... Read More

    September 29, 2020

    Credit Score