Employee Credit Checks

Good Morning America ran a great piece this week regarding employee credit checks. That's right, I said employee credit checks. A survey conducted by Visa revealed that only 20% of Americans are aware that employers can not only perform credit checks on prospective employees, but can also deny them a position based on their credit history.

The article shares the story of one woman who finds the job of her dreams, completes the interviewing process, and finds out that an offer will not be made due to her poor credit history. Her credit history included two delinquent credit cards totaling roughly $8,000.

According to Tory Johnson, Workplace Contributor for Good Morning America, these credit checks are more prevalent in specific positions. Employers are looking at credit reports as an indication of responsibility especially in areas where you will be dealing with money management, trade secrets and highly confidential information.

A study done by the Society for Human Resource Management showed that 35% of employers surveyed pulled the credit of potential employees in 2002. That's an astounding statistic compared to how few people actually know of this practice. When a potential employer pulls your credit they are usually looking for 3 things:

• Amount of debt you carry
• Negative accounts
• Number of delinquencies

According to employers using credit checks on potential employees, this information gives them a good indication of the employee's character; however, according to MSN it hasn't been a good predictor of workplace theft. While the idea of having our credit run might make some of our stomachs turn, I feel it's completely reasonable for certain employers to look for financially responsible people, especially in financial industries where you're expected to take care of someone else's money.

Is this legal?

Companies have every right to check your credit as part of a background check, but only with your permission. You most likely skip over the fine print when filling out an application with a potential employer, but that's where you'll find their disclosure. When you sign that application, you've given them full access to you past.

Just because you're credit isn't in top notch shape, doesn't mean you're unemployable. In many cases, a prospective employer will make you an offer contingent upon something. In some cases, it may be contingent upon your background and credit check. If this is the case, try being up front with the potential employer. Tell them that you would like the chance to explain things that they might see on your credit report. In many instances, there are extenuating circumstances behind any delinquencies you might have and employers are often receptive to hearing them. Try to refrain from over-explaining and making the employer feel like you have too much baggage. Also, only bring it up when you're made aware they will be screening your credit and then, only after an offer has been made.

It's always a good idea to check your credit report often. In some cases, your identity can be stolen without you even knowing. If we aren't a victim of identity theft, there are often little charges showing up here and there that are mistakes and should be removed. It's usually a time consuming process to begin to clear these issues up. If you're aware that you will be interviewing with a company that will require a credit check, it's a great idea to check your own credit first. If you do have to clarify certain issues, it's much easier to explain that you're addressing them right now and they will be cleared up shortly. The government offers you a free credit report annually. Click here to get yours.

With divorce at an all time high, our economy in a less than desirable state, and foreclosures through the roof, it's not uncommon for the masses to be affected by one or all of these circumstances. And, all can drive our credit into the ground. Don't be ashamed or avoid applying to jobs because of these credit checks. Put yourself out there and when you know you've secured an offer, explain your minor set-backs. Employers will appreciate your honesty as it will show more character than your credit report ever will.