What do employers look for during a credit check before hiring?
May 2, 2011 1:58 PM   Subscribe

What would a prospective employer be looking for if they run a credit check, and should I be concerned?

I had a job interview today with a company I'm very interested in working for, and during the interview the manager told me they'd be doing a "civil, criminal, and credit" background check on me.

I haven't really ever had credit. I haven't had a bank account in over a decade; I tend to live via cash or my pre-paid debit card which I keep loaded for purchases. I haven't had a credit card since I was 18 (I'm now 43), and don't have any car loans or anything like that on my record. (I have an odd off-the-grid mentality when it comes to finances.)

I'm wondering whether my lack of credit history/presence, or possibly any negative things from over a decade ago (which weren't major, but certainly present -- under $300 total, if memory serves) are going to end up with my being denied this job?

I'd like to be forthcoming with the guy who interviewed me (who is expecting a call back in the next day or so about whether I want my application to move forward), but don't want to say anything which would be a red flag when I tell him that I have no clear credit history to be checked.

What do I need to worry about with this credit background check, and what can/should I tell the man when I call him in tomorrow which will give him the right information about me having little to no credit history but won't set of alarm bells?
posted by hippybear to Work & Money (16 answers total) 3 users marked this as a favorite
A credit check can show when someone is over-extended, a risk if that person is in a position to steal goods or cash. It can also indicate how responsible that person is.

In your case, I would simply say "sounds like a good idea, be aware that I tend to only use cash and have acquired little debt.". As an employer I would see this as a good thing in this day and age.
posted by tomswift at 2:05 PM on May 2, 2011 [1 favorite]

They're checking to see if you're reliable. You can pull your credit report yourself for free, and check up on it, to make sure that it's accurate. *Generally speaking*, 6 years after anything changes, or you default, it's removed from your credit report. It might be worth pulling them (there are three credit reporting agencies, and while they should all communicate with one another, sometimes they don't) anyway, to check that nobody has opened lines of credit in your name.

If I were you, I wouldn't mention the report at all. Let them pull it and let it speak for itself.

On a personal level, I'd refuse a job that necessitated a credit check. Whether I can pay my bills on time has little bearing on whether I can do a job, and it just seems invasive to me, even if it is common practice.
posted by Solomon at 2:05 PM on May 2, 2011 [1 favorite]

To my understanding, credit checks are mostly to determine if you're in a bad monetary situation. If you've defaulted on all your credit cards, are way overdue on your mortgage, etc, then that makes you a weak link, security-wise, and can be a reason to deny you a security clearance. tomswift's response sounds like a good answer to their request.
posted by specialagentwebb at 2:09 PM on May 2, 2011

FYI this is extremely common in the financial industry (in the UK anyway). There are a few agencies that provide this as a service to a lot of clients (they also check previous employment and so on). If there are any questions they may contact you direct to resolve it. I agree that tomswift's answer is a good one.
posted by plep at 2:16 PM on May 2, 2011

I'm wondering whether my lack of credit history/presence, or possibly any negative things from over a decade ago (which weren't major, but certainly present -- under $300 total, if memory serves) are going to end up with my being denied this job?

Probably not. I have a similar lack of credit history, because I pay cash. This means that I have to put down deposits in some cases where I'm getting a service, and when I recently rented, I had to show income greater than four times the rent rather than three times (as my income was considerably more than four times the rent, and verifiable, no problem).

For jobs, and background checks, the lack of credit history usually gets remarked on, occasionally invokes more questioning, but has not been disqualifying.
posted by orthogonality at 2:24 PM on May 2, 2011

Once a potential employer ran this check on me. HR called me and said there were issues on my credit with some unpaid debts, and would I care to explain?

I was very upset and defensive at first, but I talked to my mom and she said to tell them that the debts in question were in dispute and that naturally I intended to pay them if it turned out I was actually liable (this was mostly true).

The HR lady said, "Great, thanks for letting us know." I got the job. It was never addressed again.
posted by hermitosis at 3:10 PM on May 2, 2011

Hippybear- you might have some explaining to do but an absence of credit is different than page after page of charge-offs. Also it's a good sign that they're asking to run a check, companies don't like to run them unless they plan on moving forward. Besides the cost they have to notify you if they find something bad and that just adds another layer of difficulty to the entire process

Solomon- good luck finding a job that doesn't run a credit check anymore. I'm in Internal Audit and I can tell you from experience that a credit test is a much more effective tool than a drug test for weeding out trouble. Every fraud I've seen was due to money problems, usually gambling related. Drug addicts and drunks are comparatively less risky.
posted by JohntheContrarian at 4:37 PM on May 2, 2011

1. You can run your credit check yourself on any of the free credit report sites. Most or sort of scammy in that it is simple to sign up, but you have to call to actually cancel. I am in a similar situation to you and have a very good credit score. You probably don't have anything to worry about.

2. We run credit checks on certain positions and we've denied people based on credit checks. These have always been big, glaring things, like bankruptcy. We have some positions where you could really fuck us over if you went to a vendor and said, "I can guarantee you this contract if you can get me a new deck / free meals at your restaurant / new washer and dryer." You might say that a scummy person would do this with or without bad credit, and I agree, but the temptation is much, much harder when you have child support to make (which throws you in jail) and your lawn mower breaks down and you're working with a Local Lawn Care guy and you mention that your mower broke down and if you had any lawn mowers that are just, laying around, it'd sure be of help and looking back you can't believe that this guy fucked us over on a used, $100 lawn mower and you think to yourself, this sucker should have asked for a top of the line model ... but that's never how these things go down.

I'm guessing most jobs that credit check don't really need to, but there are positions where credit checks help determine whether someone is fiscally responsible and fit for a position that requires managing large sums of money.
posted by geoff. at 4:49 PM on May 2, 2011

An employer might wonder why a 43 year old would have no bank account, and how a 43 year old lives responsibility without one -- do you bury your savings in cash in the backyard? Do you have no savings at all? Because someone might wonder, have a good, practiced answer to the question that doesn't make you seem eccentric, a risk at quitting on a moment's notice, or untrustworthy.
posted by MattD at 5:20 PM on May 2, 2011 [1 favorite]

Echoing MattD.

Meanwhile, check your credit score for yourself. It's free.
posted by Short Attention Sp at 5:36 PM on May 2, 2011

First, check your credit for free at the government website for such things---annual credit report, not free credit report---look it up. The real government site does NOT require a signup and is NOT scammy. Be careful with this. Won't give you a score, just gives you the report.

Second, I've never had a job that didn't require this. Many companies are doing them just to ascertain general trustworthiness but many others are doing it because they need to bond you. This is a legitimate reason for them to check it, they can't insure you with the bonder without the credit check. Sucks, but there it is. And if I was unwilling, due to philosophical reasons, to undergo this process, I'd be unemployed. Not that I don't get the sentiment but this is super common in the US these days.

Having said all that, a lack of credit history will probably not disqualify you. I'd mention your preference for cash to them. And they may question your identity a little cause a 43 year old with no recent history would make me think it was a stolen identity of a deceased person. But I doubt it will cause them not to give you a job.
posted by supercapitalist at 6:56 PM on May 2, 2011

They're looking for evidence of trouble, like JohntheContrarian said, in an effort to forestall the trouble coming into the office. For example, I had a client company who instituted credit checks after an incident in where a repo man came to one of their office parking lots to repossess the car of an employee, resulting a huge messy scene. Monetary troubles leading to embezzlement is another danger.

I don't think an absence of a credit history will be at all problematic, especially if you tell them up front that they won't find a lot because you prefer cash. They're looking for recent bankruptcies, big outstanding balances, stuff like that.
posted by fingersandtoes at 8:42 PM on May 2, 2011

I have horrendous credit and had a background/credit check for my current ( non-clearance) government job.
Along with an extensive background check. Basically they used it to see if you had massive amounts of debt (risk for bribes), check for past address information, foreign money exchanges, etc. I ended up with the job, so, they weren't looking for how responsible with my money I have been.

Some emloyers such as financial companies or jobs that have financial responsibilities will check to see if you have decent credit because they feel the way you manage money reflects the way you would handle theirs.
posted by KogeLiz at 10:16 PM on May 2, 2011 [1 favorite]

You might have a problem if your employer is inclined to disbelieve you. When I was living without a credit history, it was explained to me that people with no credit history were so rare, that if a person claimed to have no credit history, it was much more likely that they were hiding a very bad credit history. It was explained to me as a matter of numbers -- that people with v.b. credit histories and likely to lie about them outnumber people without credit histories.

I do not know if that is actually true -- that the liars outnumber the credit-free -- and I do not know how widespread the belief that it is true is.

On the other hand, your bank account history shouldn't appear on a credit history unless you were actually delinquent on an account in some fashion. So, your lack of credit history doesn't actually tell the potential employer about your banking habits, just that you don't have bad ones. So your banking habits don't need explanation, just your lack of a credit report -- and all you really have to say is that you haven't borrowed money in a long time and you pay your debts.
posted by endless_forms at 10:26 AM on May 3, 2011

Thanks for the advice from people about doing the free credit checks. I'd never done that before, and couldn't find anything untoward lurking there which would be a red flag. Couldn't find much at all, but found more than I expected, so it was interesting to look and see.

And thanks for the advice about how to address this minimally without getting too deep into excuse making, and also letting the credit reports speak for themselves.

I've had the brief conversation I needed to have to move the job application forward. I hope I end up employed -- I really could use a job and income. Having y'all's input helped put a lot of my fears about this particular part of the process to rest, and I appreciate it.
posted by hippybear at 9:06 PM on May 3, 2011

Go to https://www.annualcreditreport.com/cra/index.jsp for a free credit report, choose one of the agencies.
posted by ejaned8 at 6:43 AM on May 4, 2011

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