Does Credit Score Affect Background Check?

Getting a new job or volunteering for an organization often requires undergoing a background check. This helps employers or organizations vet candidates and avoid potential issues down the line. One common element of background checks is checking a candidate’s credit history and score. But does your credit score actually impact whether you pass a background check?

The short answer is no – your credit score itself does not determine if you pass a background check. However, the contents of your credit report may influence an employer’s decision. Let’s take a deeper look at what background checks entail, why credit comes into play, and how you can prepare if your credit needs work.

What is a Background Check?

A background check is when an employer landlord or organization investigates a candidate’s history to verify information and uncover any potential red flags. Background checks typically include

• Identity verification – Confirming legal name, date of birth, Social Security number to prove identity.

• Criminal history – Checking for any arrests, convictions, or current warrants.

• Employment history – Confirming previous job titles, duties, dates of employment.

• Education – Verifying degrees, schools attended, and dates.

• Motor vehicle records – Reviewing driving offenses such as DUIs and license suspensions.

• Credit history – Looking for bankruptcies, late payments, maxed out cards, and other financial red flags.

Background checks provide employers with greater confidence that candidates are trustworthy, responsible, and qualified for the role. Checks are especially common for jobs handling money, sensitive data, working with children, or requiring government security clearance.

Why Are Credit Reports Included?

Many employers argue that your credit report provides insights into how financially responsible you are. Some key aspects they look for:

• Late Payments – Multiple late or missed payments may indicate disorganization or unreliability.

• High Balances – Maxing out credit cards or having excessive debt could suggest financial distress.

• Collections – Unpaid bills sent to collection agencies may be a red flag about meeting obligations.

• Bankruptcies – Declaring bankruptcy signals past financial struggles employers may want to avoid.

For positions with financial responsibilities or handling sensitive customer data, these could be warning signs of a candidate potentially being susceptible to fraud or theft. That said, advocates argue credit history is not reflective of someone’s work ethic or trustworthiness.

Does a Credit Check Affect Your Credit Score?

The good news is that a credit check for employment purposes does not negatively impact your credit score.

Employment checks are considered “soft inquiries” that simply review your report without affecting your score. Soft checks include:

• Prescreening for credit card offers

• Checking your own credit report

• Account review by an existing lender

• Utilities checking your credit

• Employment background checks

In contrast, “hard inquiries” occur when applying for new credit like a mortgage, auto loan, or credit card. These do slightly ding your score. However, employment checks only create soft inquiries that don’t lower your credit score.

Preparing for an Employer Credit Check

If you know a background check with a credit component is coming, some tips to prepare include:

• Check your own credit reports – Review reports from Equifax, TransUnion, and Experian to understand what will be visible to employers.

• Dispute errors – If you find mistakes on your reports, dispute them with the credit bureau ASAP.

• Explain red flags – If you have past financial issues, prepare an explanation for potential concerns.

• Improve your credit – Pay down balances, dispute errors, or settle collections accounts if you can.

While a credit check itself doesn’t determine your eligibility, taking these steps will put you in a stronger position and address any problematic items on your report.

Your Rights Related to Background Checks

It’s important to understand your rights when an employer runs a background check:

• They must disclose they intend to run a credit check and get your authorization.

• You must receive a pre-adverse action notice if they may deny you the job based on the results.

• You can dispute inaccurate information on your report within a reasonable time period before a final decision.

• If you are denied a job based on the background check, they must provide contact details for the screening agency.

• You can then obtain a free copy of the background check report within 60 days.

This ensures you have an opportunity to correct any incorrect information and understand the reason for being denied employment.

The Bottom Line

While your credit score itself does not determine if you pass background checks, the contents of your credit report may influence hiring decisions for certain positions. Solid credit can support your application, while red flags may raise concerns for employers.

The best preparation is checking your own credit reports in advance so you can dispute any errors before employers see them. If you have past financial issues, being proactive about explaining these to potential employers is also wise.

With the right context, employers may be willing to look past isolated stumbles if the rest of your background check is positive. While not ideal, a few credit issues alone won’t necessarily cause you to fail a background check as long as you take steps to prevent them from catching employers off guard.