Why Credit History Employment Inquiries Matter

Last week, we covered a story in which a job seeker was denied a job because of his credit report.

Have you wondered why?

At my last job, during the routine background investigation process, I had asked investigators why they reviewed credit histories. They gave some predictable answers. If you have a lot of debt, you may be more susceptible to bribes or you’re more likely to steal. If you don’t have a lot of debt but are otherwise reckless with money, you might soon acquire a lot of debt and fall into the same trap. Beyond those two tenuous but plausible reasons, there were others I didn’t think of. The prime example has to do with residency and corroborating what your rÈsumÈ claims. If my rÈsumÈ states that I worked at a company in Pittsburgh for five years, I should have a western Pennsylvania address listed as a former address on my credit report. If that address isn’t on my report, it’s possible I’m falsifying my rÈsumÈ.

This underscores the importance of regularly reviewing your credit reports.

If you’re curious what you can do to clean up your image, I found an undated article by Liz Pulliam Weston on employment inquiries. It discusses what you can do to clean up your report, what protections you have under the Fair Credit Reporting Act, and what you can do if you are denied a job because of your credit.

Also in the article, she talked to James Lee, chief marketing offer of ChoicePoint Inc., which does background checks. According to Lee:

Credit has not turned out to be a good predictor of workplace theft. This is what our customers are telling us, anyway, Lee said. A better predictor is a criminal history involving bounced checks.

So while they’re not a good predictor, employers are still checking anyway. Incidentally, bounced checks are reported on specialty reports offered by ChexSystems. You’re given the same free annual right to review those reports as you are credit reports.

Have you ever been denied a job because of your credit?

Jim writes about personal finance at Bargaineering.com.

(Photo: pyxopotamus)