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Singletary: History not credit score used in hiring

By Michelle Singletary

Published: September 9, 2016, 6:02am

Your credit history impacts so much of your financial life.

The information in your credit file — how you pay your debt — can affect your ability to get the best interest rate on a loan. It can be used to generate an insurance credit score that along with other information — your driving record, claims history — can impact what you pay for auto or home insurance. It matters when renting a place to live.

And you’ve probably heard or read that a bad credit history might cost you a job.

But on this last point, some clarification is needed.

For a series of columns on myths about credit scoring, I’ve asked representatives from the three major credit bureaus — Equifax, Experian, TransUnion — and FICO, the company that created the credit-scoring model used by most lenders, to address some common misconceptions. In this installment, they clear up the fear many people have that a low credit score can keep them from being hired.

Employers have to first get permission to view your credit history. If you grant them access, they get a dressed-down version of the record lenders typically see. And most importantly, the report does not include your credit score.

So it’s your history — not your score — that could impact getting a job.

The files the credit bureaus keep on you contain a record of how you’ve handled your debts. This information is used to generate credit scores, which are used to measure how much of a financial risk you may be.

Concern about the use of people’s credit history ramped up after a 2012 report by the Society for Human Resource Management. It stated correctly that, in some hiring decisions, employers were taking people’s credit report into account. But “credit report” and “credit score” are often interchanged, and thus the myth or misunderstanding was proliferated. (I’ve even slipped up failing to clarify the difference.)

So, to be clear, an employer does not get your credit score along with your credit report.

“Credit scores are not used for employment-screening purposes,” said Can Arkali, principal scientist for FICO.

SHRM found that the top two reasons employers want to see a credit report is to prevent theft and to reduce legal liability for negligent hiring. Employers also pull the history to comply with state laws requiring a background check for certain positions. I’ve helped people improve their credit profile so that they don’t lose their security clearance.

“The report gives [employers] insight into your personal money management habits and overall financial well-being, which helps them manage risk to the company,” said Rod Griffin, director of public education for Experian.

Griffin also pointed out that employers do a credit background check for identity verification. “Doing so protects the business from employment fraud and potentially the public from harm. For example, a chemical factory may use the report to verify the identity of applicants to ensure they aren’t falsifying information so that they could access dangerous chemicals that could be used to harm people.”

By the way, if the employment credit report plays any part in a decision that negatively impacts you, federal law requires the company to give you a copy of the report along with a written description of your rights.

Experian’s employer report withholds information that is irrelevant to hiring decisions, Griffin said.

Even if you have a bad credit history, an overwhelming majority of employers said they allow candidates to explain their financial situation before a hiring decision is made, according to the SHRM report.

So, once again, the facts should help allay your fears.

Michelle Singletary welcomes comments and column ideas. Reach her in care of The Washington Post, 1150 15th St. N.W., Washington, DC 20071; or singletarym@washpost.com.

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