Does Your Credit Score Show up on a Background Check?

Employers may run a background check and credit check before hiring a new employee, but one is not necessarily part of the other. Real estate agents and landlords may insist on getting financial information, which may include credit scores and history. Every background check is constructed differently. This article will explain what that means. Here are some key takeaways from this article:

• The nature and construct of the background check are dependent upon the individual or organization requesting it.
• Employers are legally required to disclose their intent to run a background check and obtain written consent.
• Credit checks can be performed internally by checking credit reporting agencies like Equifax, Experian, or TransUnion. 

Understanding background checks

The nature of the background check is dependent upon the individual or organization that requests it. For example, a prospective employer may want to know the employment history and possibly the criminal background of job applicants. The background check will be structured to reflect those needs. More specialized jobs may require more information.

A request for financial or credit information isn’t necessary for many job situations, but that doesn’t mean the employer won’t require it. Applicants should ask what the background check entails before signing the authorization to have it done. Employers are legally required to disclose their intent to run a background check and obtain written consent.

If you’re an employer, you should prepare consent forms and written explanations of what you’ll include in a background check and why it’s conducted. Disclosures are legally required if you use an outside agency to run the background check, but it’s good form to notify people if you’re going to be digging into their work history and financial track record.

Credit checks: What's included?

Does a background check include a credit check? They are significantly different processes. A credit check can be performed internally by checking credit reporting agencies like Equifax, Experian, or TransUnion. A general background check typically requires the assistance of an outside agency to verify employment history and check criminal backgrounds.

There are two types of credit checks. A soft inquiry is a cursory check that can be done by an individual or companies promoting pre-approved credit card and loan offerings. Hard inquiries are a deep dive into credit and payment history. Soft inquiries don’t affect your credit score. Hard inquiries can cause a slight score reduction.

A credit check will typically search the applicant’s credit report, but that doesn’t include checking credit scores. A credit report contains detailed information that includes defaults, collection cases, and payment history. Apartment hunters and homebuyers are usually subject to a credit check before being approved for a lease or mortgage.

Do background checks show credit scores?

A background check is unlikely to show a credit score, but a credit check almost certainly will. Employers outside of the financial or security sectors aren’t interested in credit scores. They look at criminal backgrounds and work history; the information that tells them if the applicant is capable and reliable. They also need permission to check your credit score.

It’s important not to confuse credit scores with credit history. A credit score is a number calculated by reporting agencies like FICO. It’s used by banks and credit card companies to assess the risk of approving an applicant for credit. Credit history shows the debt and payment track record of an individual, which doesn’t show up on a background check.

As we mentioned earlier, every background check is different, so a company can include a credit check as part of the process, provided they get a signed authorization from the applicant. That authorization does not usually permit checking credit scores. Knowing the difference can help alleviate the fears of job applicants worried about revealing that information.

Why credit history matters in background checks

Thorough background checks often reveal financial information. Even though your credit score doesn’t appear in a background check, the history that shows up can significantly impact how you're perceived. An example of this is court appearances for unpaid debt that show up on a criminal background check. In those cases, employers may ask for a letter of explanation.

"The credit score usually isn't revealed on a background check," notes Roslyn Lash, an Accredited Financial Counselor. "However, your credit history is more likely to show up. Even if the actual score isn't given, a history is more revealing since it provides more details, including dates, amounts owed, and delinquencies."

Credit history can be particularly important for jobs in financial services, positions that involve handling company funds, or roles requiring security clearances. In those cases, employers may view consistent late payments or significant debt as red flags because financial stress could impact job performance or create incentives for theft or fraud.

How to prepare for a background check with credit review

There are steps you can take to prepare for the inevitable background and credit check when applying for a job or searching for an apartment:

1. Check your credit report in advance through AnnualCreditReport.com. By law, you're entitled to one free report from each bureau annually. Review it for errors or outdated information.
2. Dispute any errors you find directly with the credit bureaus. The Fair Credit Reporting Act gives you the right to contest inaccurate information.
3. Improve your creditworthiness by paying bills on time, reducing outstanding debt, and avoiding new credit applications in the months leading up to an important application.
4. Be prepared to explain negative items that may appear. Many employers and landlords are willing to consider context if you're upfront about past financial difficulties.

Taking these proactive steps can significantly improve your chances of passing a background check, even if your credit history isn't perfect.

Conclusion

Credit scores don’t show up on background checks, but your credit history might. Make sure you get a copy of the authorization you need to sign for a prospective employer or rental agency to run that check. Prepare for it by doing a check of your own to ensure your credit report doesn’t contain errors. Credit scores are harder to change, but you don’t need to worry about that today. Employers cannot check your credit score without your permission.

Roslyn Lash (@CoachRosLash) is an Accredited Financial Counselor and the Author of The 7 Fruits of Budgeting. She specializes in financial education, adult coaching, and works virtually with adults helping them to navigate their personal finances i.e. budgeting, debt, and credit repair. Roslyn is a Real Estate Broker and also the founder of Youth Smart Financial Education Services which specializes in financial literacy. Her advice has been featured in national publications such as USA Today, Forbes, TIME, Huffington Post, Los Angeles Times, and a host of other media outlets.