What to Know About Credit Checks for Employment

Updated: November 1, 2024

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An HR specialist and a candidate in a job interview.

Employers often look beyond your resume and interview to understand who you are as a candidate, and sometimes that means checking your credit report. An employment credit check can be a crucial part of the hiring process for roles that require trust, financial responsibility or access to sensitive information.

From understanding the details that employers can and cannot see to the state-specific regulations that might protect you, we’ll break down everything you need to know about employment credit checks to help you stay prepared when starting a new career. We’ll also share practical strategies to strengthen your credit profile and confidently navigate the hiring process.

Key Takeaways: Employment Credit Checks

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Employers use credit checks to evaluate your financial behavior — including payment history and outstanding debts — most often for roles that require high levels of trust and responsibility.

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Federal and state laws require employers to obtain your consent before conducting a credit check and to notify you if it impacts their hiring decision.

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Prepare for an employment credit check by reviewing your credit report, disputing any errors and managing your debts to present a strong financial profile.

What Is a Pre-Employment Credit Check?

An employment credit check allows employers to review candidates' credit reports to understand their financial behavior. Unlike a credit check by a lender, it does not evaluate your ability to borrow money; it provides a view of how well you manage your financial obligations. Employers look for indicators of financial stability or potential concerns — such as unpaid debts or a pattern of missed payments — to gauge a person’s reliability and responsibility.

Although lenders and employers both access your credit report, their focus and the information they see differ. Employers do not view your credit score, and their inquiry is considered a "soft pull," which does not affect your credit rating. They are mainly interested in any signs of financial mismanagement that could pose a risk.

Pre-employment credit checks are more common in fields where trust is essential. They are often used for positions that involve managing finances, accessing sensitive data or making critical decisions. Common roles include:

  • Finance (financial analysts, accountants)
  • Government (federal employees, contractors)
  • Security (security personnel, cybersecurity experts)
  • Executive positions in various sectors

Main Reasons Employers Conduct Credit Checks

Employers check credit reports to evaluate a candidate’s trustworthiness and financial stability, particularly for roles with access to financial assets or confidential information. Reviewing financial histories helps them make informed hiring decisions that protect the organization from potential risks.

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    Security and Risk Mitigation

    Credit checks are used to spot red flags that might suggest a candidate could pose a security threat, such as a history of financial mismanagement or unresolved debt issues. For roles involving access to funds or sensitive data, employers need assurance that financial pressures won’t tempt employees.

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    Verification of Identity and Background

    Checking a credit report allows employers to confirm an applicant's identity and cross-check details like previous addresses or employment history. This step can help detect inconsistencies or potential fraud, ensuring that only credible candidates move forward in the hiring process.

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    Assessment of Financial Responsibility

    Employers assess a candidate’s credit history to gauge how they handle their financial obligations, like paying bills on time or managing credit accounts wisely. A record of responsible financial behavior can suggest reliability and trustworthiness, traits that are especially valued in roles involving money management or high-stakes decision-making.

What Employers Can Access in a Credit Check

When employers check your credit, they gain access to specific details like the types of credit accounts you have, such as credit cards or loans, your payment history and any public records, like bankruptcies. These elements help them evaluate your financial responsibility, especially for positions that require a high level of trust.

Unlike lenders, employers do not have access to your full financial profile. They can't view your credit score, income or personal details, such as marital status or race. Their primary interest is understanding any potential financial risks rather than assessing your ability to repay debts.

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What Employers Can See
  • Types of credit accounts (credit cards, loans)
  • Balances on accounts
  • Payment history (on-time, late payments)
  • Bankruptcies and other public financial records
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What Employers Cannot See
  • Credit score
  • Income or salary details
  • Medical bills (unless in collections)
  • Personal information (e.g., marital status, race, religion)

When employers check your credit, it counts as a "soft inquiry," which does not affect your credit score. Understanding the difference between hard and soft credit inquiries is important — soft inquiries, like those by employers, are visible only to you and do not impact your credit rating. Meanwhile, hard inquiries, such as applying for new credit or loans, may lower your score.

Your Legal Rights and Protections in Employment Credit Checks

Federal and state laws protect your rights during employment credit checks, ensuring that employers follow proper procedures before accessing your financial information. Knowing these rights helps safeguard your personal data and address any issues that might arise.

FCRA Protections

The Fair Credit Reporting Act (FCRA) provides specific rights for job applicants when employers conduct credit checks. Before accessing your credit report, employers must obtain your written permission, allowing you to be fully informed and agree to this part of the hiring process.

If an employer chooses not to hire you based on information found in your credit report, they must inform you and provide a copy of the report used. This allows you to review the details influencing their decision and dispute any errors directly with the credit bureau to correct inaccuracies and protect your credit standing.

State-Specific Regulations in Employment Credit Checks

Many cities and states have implemented laws that restrict or ban employment credit checks to protect applicants from potential discrimination. These regulations vary, so be sure to check your local laws:

Location
Regulation

California

California law limits credit checks to roles like managerial positions, law enforcement or jobs in financial institutions. Enacted in 2012, these restrictions also cover positions involving access to confidential information or large sums of money.

New York City

The Stop Credit Discrimination in Employment Act bans credit checks for most jobs, but exceptions include police officers, those handling substantial financial responsibilities and positions requiring national security clearance.

Chicago

Chicago’s Human Rights Ordinance restricts credit checks to specific roles, such as those handling large amounts of cash or assets. Jobs in the financial sector or where a background check is mandated by federal law are also exempt.

Philadelphia

Philadelphia’s Fair Practices Ordinance generally prohibits credit checks but allows exceptions for positions like CFOs or other roles requiring bonding or that involve handling sensitive company information.

Colorado

Since 2013, Colorado law has permitted credit checks only if the employer can demonstrate that they are substantially related to the job. Positions like financial controllers or those with fiduciary duties are commonly exempted.

To ensure compliance with these regulations, review specific state and local laws or consult resources such as the National Conference of State Legislatures (NCSL) or your state's labor department website.

How Far Back Employment Credit Checks Go

Most credit checks for employment consider financial history from the past seven to 10 years, allowing employers to assess recent financial behavior like payment history and account management. For some roles, particularly those with substantial financial responsibilities, a deeper look into older records may be required to identify any past issues.

The length of time specific financial information stays on your credit report can differ. Bankruptcies may be listed for up to 10 years, while other negative marks — such as late payments or collections — usually remain for seven years.

5 Ways to Prepare for an Employment Credit Check

Preparing for a credit check can help you feel more confident during the hiring process. Taking proactive steps to review and strengthen your credit report can give you an advantage if an employer decides to examine your financial history.

  1. 1
    Get Your Free Credit Report

    Start by obtaining a free copy of your credit report from each of the three major bureaus — Experian, Equifax and TransUnion — through AnnualCreditReport.com. Carefully review each report for any discrepancies or errors that could affect your credit standing. Check your report regularly to spot issues early and correct them before they impact a potential job opportunity.

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    Spot and Dispute Errors

    Look closely for mistakes like incorrect addresses, duplicated accounts or inaccurate payment histories. If you find an error on your credit report, visit the Federal Trade Commission's guide to disputing errors for detailed steps. You’ll need to collect supporting documents, draft a dispute letter and send it to both the credit bureau and the organization that reported the incorrect information.

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    Pay Down Debt

    Prioritize paying off high-interest debts first, such as credit card balances, to reduce your overall debt load and improve your credit utilization rate. Keeping your credit balances low relative to your available credit limits demonstrates responsible financial management, which may positively influence an employer's perception of you.

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    Hold Off on New Credit Applications

    Avoid applying for new credit cards, loans or other forms of credit while you’re actively searching for a job. New credit applications can lead to hard inquiries on your report, which might raise concerns for potential employers about your financial stability or need for additional credit.

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    Prepare Explanations for Negative Marks

    If your credit report shows any negative marks — such as late payments due to unforeseen circumstances like a job loss or medical emergency — be ready to provide a brief, honest explanation. Employers may appreciate the transparency and context you provide, which can help mitigate concerns about your financial reliability.

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BEST RESOURCES TO KEEP YOUR CREDIT IN CHECK
  • MyFICO: Get your official FICO score and explore tools that help you understand and improve your credit profile.
  • CreditWise by Capital One: Stay informed about changes to your credit report with free monitoring and real-time alerts.
  • Self’s Credit Builder: Build or enhance your credit score through small, manageable loans tailored to those with limited credit history.
  • GreenPath Financial Wellness: Access personalized credit counseling and debt management support from this trusted nonprofit.
  • Credit Karma: Monitor your credit for free, with regular updates and access to your credit reports.

FAQ About Employment Credit Checks

Being informed about employment credit checks can give you an edge as a job applicant. Here’s what you need to know if a credit check is part of the hiring process.

Why do employers check credit for employment?

What does a credit check for employment show?

Do employers check your credit score or just your credit report?

Can I refuse a credit check for employment?

About Nathan Paulus


Nathan Paulus headshot

Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.

Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.


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