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Why Do Prospective Employers Run a Credit Check? How to Make Sure Your Credit Is Up to Par

Derek Cirino - Feb 17, 2021

If you are finding work at higher levels of an organization or looking for opportunities in select industries, applying for a new job may come with a few intricate requirements. From displaying a stellar employment history to an impressive educational background, you have to tick quite a few boxes for your job application.

Running a credit check is one such aspect that is related to some potential employment opportunities. If you have a positive credit report, you may be able to breeze through the selection process. But if your credit report spells any trouble, you might face a few hurdles in getting through to your potential employers.

But what exactly motivates potential employers to run these credit checks? Why do they hold such significance for certain industries? Most importantly, how can you make sure that your credit scores are up to general satisfaction?

Here’s an overview of employment-related credit checks and their overall functionality to help you find the answers to these critical questions.

1. What Types of Employers Require Credit Checks?

Similar to suggesting that employees maintain a checking account, running background checks on potential employees is quite a widespread practice across all business sectors. These checks include information such as the candidate’s education, employment history, criminal records, and driving records. 

But when it comes to incorporating credit checks into this practice, not many employers follow that requirement. Instead, credit checks are either only performed when they are required by law, or when they are executed by employers who work in certain industries. In the latter case, they are typically performed for positions where financial responsibility or associated liability relates to the candidate’s professional performance. 

These businesses usually include those entities that offer financial services such as asset management or fund management. But there are times when companies in sensitive sectors such as security services or controlled substance distribution also follow this approach. In these cases, running credit checks is another way of verifying each candidate’s identity rather than their financial expertise. 

To summarize, a company can run credit checks if they are allowed by state law and if the company offers a service that justifies the approach. In fact, it is only legal for businesses in select industries to perform these credit checks in many jurisdictions.

2. What Type of Information Is Available Through a Credit Check?

When a potential employer runs a credit check on a candidate, it can help retain basic information about the potential employee’s finances. This includes available records regarding liabilities and assets, such as mortgages, student loans, and credit card debt. The credit report also includes information regarding bankruptcy records from the last ten years. 

Together, these records paint a general picture of an individual’s finances and general liabilities. Apart from telling the employer about any debt that the candidate in question may have on their shoulders, it also outlines notable financial downturns through bankruptcy records. 

These records are obtained with the candidate’s consent, with the employer in question requesting them during any part of the interview process. While some businesses prefer to do these checks pretty early in the hiring process, others perform them just before making a serious offer.

Due to the extent of financial information covered by these credit checks, they remain an intensive part of the hiring process for many candidates and employers alike. Whether you are changing your career or applying to a different company within your existing sector, you might be required to go through these credit checks under select circumstances.

3. Why Do Employers Think Credit Checks Are Important?

Credit checks are necessary because they tell the employer in question about their potential employee’s financial history and responsibility. As mentioned above, this information might not be related to a majority of job positions. But it is critical when it comes to businesses where good financial management is key to the company’s success and security. 

Even then, credit checks by financial institutions are mostly performed for their managerial or leadership positions. This ensures that the candidate they are dealing with doesn’t come with a deeply negative history of handling finances. As a result, the employer can ensure that the candidate they are welcoming in their midst doesn’t have an excessive chance of causing harm to their operations.

In addition to assessing the financial prowess of a candidate, credit checks can determine if the hired candidate may pose a security risk for the company. For instance, if a business operates in a sensitive sector, a candidate’s poor financial situation might make them susceptible to corruption or embezzlement. 

Due to this reason, certain employers make it a point to check their candidates’ financial records regardless of their industry. This equally applies to those potential employees who are making a big career change and those individuals who are merely switching companies in the same sector.

4. How to Ensure Your Credit Is Up to the Employer’s Satisfaction?

While credit reports are vital to certain employers, they are not always the deciding factor between a job opportunity’s confirmation and rejection. This is especially true when you look at this requirement through the lens of different positions. 

For instance, if a financial services firm is hiring a high-profile asset manager for their operation, a bad credit report may reflect poorly on the candidate and cause the business to rethink its offer. On the other hand, if the same firm is hiring an entry-level executive, it may not pay as much attention to the credit report. This also applies to sensitive positions in select businesses. 

But in either case, to project a positive image to the employer, your credit report must show a remarkable record for your financial management skills in your personal life. You can improve this report by cutting through excessive debt, making your loan payments on time, and utilizing credit card rewards for additional savings. 

Since these efforts may take time to reflect on your credit report, you should also make it a point to start paying attention to these aspects a few months before you submit a notable job application. Similar to considering the stability, logistics, and compensation of a job, this requires careful planning in order to increase your chances of breezing through the hiring process. 

By keeping these points in mind, you can know what to expect regarding your employer’s request for a credit report. While many companies won’t bother to run a credit check, some companies that work in financial sectors or have security concerns will check your credit to ensure that you’re responsible with your finances. Thus, in the end, maintaining a good credit score can potentially help you land your dream job.


Matt Casadona

Matt Casadona has a Bachelor of Science in Business Administration, with a concentration in Marketing and a minor in Psychology. He is currently a contributing editor for 365 Business Tips. Matt is passionate about marketing and business strategy and enjoys the San Diego life, traveling, and music. 


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