The number of employers that are using credit histories to decide which people to hire has increased dramatically in recent years. Many people are confused about why a potential employer wants to know the details of their financial situation. Actually, there is a lot of information that can be gained from reading someone's credit report. Employers also use that information to make further assumptions about a candidate.

One of the main things that employers check for is how responsible the candidate is with money. Things like bankruptcies, accounts in collection, aliases, liens, and habitual late payments may be seen as red flags. They may pay attention to the debt to credit limit ratio. It's also possible to get some employment history information from a credit report. This can be compared to the person's resume to check for honesty and accuracy. Many employers don't want to hire someone who jumps around from job to job. Some companies just want to make sure that there are no huge problems on a credit report, while others are more picky. This also depends on what position the individual is applying for.

It's most common for employers to look at a credit report if they are hiring someone who will handle money at work. How carefully an individual takes care of their own money is seen as an indication of whether they will be responsible with the company's money. In addition, candidates who have a lot of debt may be viewed as being a high risk for employee theft or embezzlement.

This is based on the premise that a person's past behavior is a good indicator of what they will do in the future. While that is an accurate assumption most of the time, it makes things difficult for an individual who is ready and willing to make changes in their life. There are also many people who are excellent workers but are bad at managing money or experienced unfortunate and uncontrollable circumstances. As it becomes more common for employers to check credit reports, people in certain fields will need to consider their financial histories as they plan their careers.

Many people feel that isn't right or fair for potential employers to be able to check their credit reports. Some see it as an invasion of privacy. The important thing to remember is that an employer can only look at an applicant's credit report if the individual gives them written permission to do so. This is usually included with background check forms in the hiring process. Read everything carefully and decide whether or not to sign, but be aware that failing to do so usually takes a candidate out of the running for a job position.

Another important thing to realize is that employers don't get the same version of a credit report as a bank or the individual would. They get what is called an “employment report,” which has less information on it. Personal details such birth date and marital status are taken off so they can't influence hiring decisions. The other thing that is not listed on an employment report is account numbers.