A Credit Check for Employment Shouldn't Derail Your Career Dreams

Job offers often come with contingencies. Before everything is official, an employer might request a background check, call your references or, in some cases, make a credit inquiry. If you have a strong financial standing, you can put yourself in a better position and feel more confident that a credit check for employment won't stand in the way of your professional growth.

That's why it's important to understand the role credit and your personal finances could play in your long-term career potential. Here's a closer look at the actual probability of being denied employment due to bad credit, and why money woes don't have to come between you and your professional aspirations.

What credit history can an employer see?

Depending on the employer, industry and role you're applying for, the interview process could include a criminal background check, drug test, credit report check, professional reference check or all of these steps. Under the Fair Credit Reporting Act, any business that wants to conduct a credit check for employment must first secure your written approval to do so.

Don't worry about signing one accidentally—the written approval must come in a format that's not part of a standard employment application. If you authorize the credit check, the employer will see a limited amount of information—specific account numbers and credit scores aren't included. Because the credit check doesn't involve or result in new loans or lines of credit, it won't negatively impact your credit score or history.

Why an employer might run a credit check

Businesses that run credit checks for prospective employment might do so because the role or industry involves handling highly sensitive information, and the business wants to take an additional step to verify your identity. They might also check because the role involves making financial decisions or handling money, and they want to make sure you're trustworthy with funds.

Regardless of the reason, how much weight an employer places on a credit report when making hiring decisions can vary by state. In California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, Washington, the District of Columbia and the cities of Chicago, New York City, and Philadelphia, laws restrict how employers can use employee credit reports in the hiring process. In January 2020, the US House of Representatives also passed the Comprehensive CREDIT Act of 2020, which includes an amendment to the Fair Credit Reporting Act that restricts the use of credit information for most employment decisions.

If a prospective employer finds information in your credit report that gives them pause, they must notify you in writing before they decide not to consider you as a candidate. You can also contact the employer to discuss the concern and dispute any information you feel is inaccurate.

If the concerning information in the report is correct, remember that your credit history isn't forever. Instead of getting discouraged, focus on taking small steps to improve your credit history. This can include building solid money habits like consistently paying your bills on time and minimizing the amount of debt you carry.

Personal finance and professional success

Financial wellness can help you focus more on your career, potentially helping you advance faster by removing barriers to a new position. Just as you can make incremental professional choices that put you on the career path you want, the basic financial decisions you make every day around spending and saving are within your control.

Use money as a tool that empowers you to have the life you want. Don't let it control your career aspirations or become a source of stress that holds you back.