Can employers check your credit score?

Applying for a new job means submitting a resume and cover letter. But can an employer also check your credit score?

Most companies run background checks on potential hires and many of them include credit and financial information, especially for roles that involve handling money or private consumer data.

While an employer can't access all the same information a lender does, a credit report gives them insights into your financial history, including payment history, outstanding debts, bankruptcies and more.

Your credit score is a 3-digit number, usually compiled by FICO or VantageScore, that sums up your credit history, including any credit card account information, balances, available credit and payment history.

A good credit score means you're more likely to repay a loan, while a low score makes you a higher risk.

Potential employers cannot access your specific credit score but they can review your credit report. In some cases, they just want to verify your identity and previous employers.

In other cases, it can help them decide if you pose a risk of theft, embezzlement or other criminal behavior.

"Credit reports indicate whether or not you're responsible and also indicate if you're in financial distress," financial expert John Ulzheimer told CNBC Select. "These are attributes that are important to employers. For example, would you want to hire someone in your accounting department who can't manage their own obligations?"

If an employer is running a credit check on you, it's most likely the last step before they make an offer. Since they cost time and money, credit checks aren't generally used to weed out a big pool of potential applicants.

Employers are more likely to run a credit check for candidates applying for a position that requires the handling of money, such as an accountant or retail clerk.

When an employer runs a credit check, they will typically see the same information a lender would, according to Ulzheimer, with the exception of your credit score and date of birth.

The available information includes:

1. Personal information: Your name, address, Social Security number and employment history. This informaiton is not used to calculate your FICO credit score, merely to confirm your identity.

2. Credit accounts: Any credit card accounts, auto loans, personal loans, mortgage or other lines of credit and loans will be listed, along with the date you opened the account, your credit or loan amount, account balances and your payment history, including whether you've made payments on time.

3. Credit inquiries: This will include a list of anyone who has accessed your credit report within the last two years, including credit and loan applications you have submitted.

4. Collections and bankruptcies: Any history of bankruptcy will be listed, as will overdue debts that have been sent to collection agencies.

"An employment inquiry is treated like a soft inquiry," said Ulzheimer. "It's not visible to other parties and not considered in credit scoring systems."

Employers typically assess applicants based on their long-term credit history, he added, about four to seven years overall.

That means if there is a big discrepancy from a few years ago, an employer may still ask you about it even if your most recent credit history is healthy.

Thanks to the Fair Credit Reporting Act, employers can't check your credit history without your written consent, usually as part of the application.

"Unlike every other credit reporting scenario, you must be given a separate notice indicating the employer is going to pull your credit reports," Ulzheimer says. "And you have to give overt written permission."

In some states, there are specific restrictions when it comes to employers using credit information for employment decisions.

Since employers are mainly looking for patterns of mismanaging money in a credit check, the best way to prepare is to know what your credit report says.

"You certainly don't want to be surprised when you go apply for a job to learn something negative is on your credit reports," Ulzheimer says. "I always advise people who are job hunting to get a good idea of what your credit reports look like well in advance. And, be able to explain any negative entries."

You're entitled to one free credit report from each of the main credit bureaus — Experian, Equifax and TransUnion — per year. You can access these reports for free at annualcreditreport.com.

Of course, the fewer red flags on your report, the less you'll have to worry about, so make sure you pay your bills on time, limit how much of your available credit you're tapping and have a good credit mix. For three-bureau credit monitoring, you can enroll in a credit monitoring service or identity theft protection service.

And remember, your credit report is just one of many factors employers consider when hiring for a position.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage product review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed credit expert John Ulzheimer, president of the Ulzheimer Group.

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