Inaccurate Credit Reports – $13 Million in Fines

It’s commonplace for many employers to pull background checks on job applicants to view things like credit history, criminal history and other factors that can better help them to determine potential risk during the hiring process. Employers who don’t pull background checks based on company policy might even do so with the candidate’s permission.

But what happens when the background check firms report faulty information to employers?

That’s been the case recently, as General Information Services and Backgroundchecks.com, two of the biggest background check firms in the country, were ordered to pay a $10.5 million fine to consumers for selling inaccurate background checks. The fine was ordered by the Consumer Financial Protection Bureau (CFPB), which also ordered the two background check firms to pay an additional $2.5 million civil penalty for failure to verify the accuracy of the reports that were sold.

The two companies sell about 10 million background reports each year to employers. And many of the inaccuracies on the reports that they are now being held accountable for weren’t exactly minor errors – they were major ones. Things like including judgments that were older than seven years, misdemeanor crimes being reported as felonies and criminal record mix ups between consumers with similar names were just a few of the issues that were reported. Affected consumers are believed to be receiving about $1,000 each from the issues fines.

It’s a bad look for the background check companies – and it brings about the question of just whether background checks for employment purposes are really worth it or not. That’s because the biggest loser in this entire background check debacle is the millions of people that were likely passed up for a job.

Know Your Credit Report

As we made mention of earlier in this piece, the practice of background checks for employment screening purposes is one that’s been the subject of much debate. However, in most cases, the potential employer makes it very clear what the company policy is in this regard during the interview process. On this note, it’s worth noting that you should be checking your credit report on at least an annual basis, especially if you expect to be looking for a new job soon. That’s because inaccuracies are common on credit reports and checking your report will give you time to sniff out and dispute errors.

Additionally, if your credit isn’t exactly up to snuff, knowing what your score is and how you might be perceived will allow you to better proactively address and clear up any issues with your would-be employer.

You can receive a free credit report once per year, and you can receive a complimentary credit summary once per month from many reputable credit report consumer websites.

Blank checks from credit card company.

Employment Troubles – How we may be able to help.

Employment TroublesWhen it comes to debt management, you may want to think twice about overspending or missing a payment. It could have an impact on your employment. The simple fact is, bad credit can cost you a job. It’s important to know how credit impacts employment as well as what steps you can take to reduce this risk.

If you are looking for a new job, hoping for a promotion, or just trying to remain in the same position, your credit score can get you in trouble if it is less than ideal. Employers are using credit checks as a key component of their hiring routine, in fact. They do so for various reasons, but studies don’t indicate a direct link between a bad credit score and poor job performance. So, why is this happening?

3 Reasons Why Employers Care About Your Credit

It is important to consider your financial health before and during your employment. While you may not be looking to finance a purchase through your employer, he or she is still using your credit information to make hiring, firing, and even lay-off decisions. This happens for these reasons:

  • A poor credit score can mean a person is less dependable in the eyes of the employer.
  • Someone who mismanages money in their personal life may be more likely to embezzle or make bad decisions managing company funds (a key reason financial managers and those in most management positions will have credit checks before being hired.)
  • In some cases, hiring someone with a bad credit history could lead to a lawsuit down the road if the employee does something wrong. Liability risks are a big factor for many employers even as far-reaching as this.

In short, employers are allowed to use credit scores in most states as a key component of the hiring process. They tend to use them when seeking individuals for financial-related positions, including senior executive positions. They want to know they can trust their employees to be responsible and reliable.

What Else You Need to Know

Should you work on credit repair? While you should work to repair credit for your benefit, keep in mind that laws are changing. Some states, including Washington, Oregon, Hawaii, Illinois, Maryland, and Connecticut, have cracked down on the practice of credit checks for employment. Second, the employer has to get your written permission to conduct such as check as directed by the Federal Fair Credit Reporting Act.

Most employers are not looking at the details of your credit report. They want to know what the big picture says about you in terms of responsibility. As a result, it is important to read through a few credit tips and work on your debt management skills. These steps can help increase your ability to get and maintain your job.

Security Clearance Problem – Bad Credit Stories

Can your bad credit effect a background check or security clearance at work?Over 4 million people hold top secret security clearance. Some are in the military, others are contractors who work with sensitive information for the federal government. The ability to get a security clearance is a requirement for many jobs; and, the increasing prevalence of bad credit is threatening many people’s eligibility.

The Dangers of Debt

High levels of debt or a poor history of repayment can keep you from getting a security clearance or, if you already have one, put your status in danger. There’s no specific number as far as credit score or amount of debt that will rule you ineligible; these decisions are made on a case by case basis. Also, unsecured debt like credit cards is handled differently than secured debt like home loans. But, experts say that, as unsecured debt levels head toward 50% of your annual, your chances of getting or maintaining clearance drop.

The reason for this is that those with high debt are considered more vulnerable. The chances of someone with paralyzingly high debt accepting bribes in exchange for information, for instance, are far higher than the risks with someone who is financially secure.

The Whole Person Approach

If you are in the military or if you work with government contracts, a security clearance may be necessary to move up in your career. A lack of eligibility can keep you off plum assignments or stagnate you and make it impossible to get promoted.

Luckily, credit and debt are not the only factors that are considered when you apply for a security clearance. During the adjudicative process, when your history is being considered, they will consider a wide range of information about your personal history. If you have black marks on your credit like a foreclosure or bankruptcy, they will take into account how recent the issue was, and what your behavior has been like since the occurrence.

How to Protect Your Clearance

If a security clearance is something that you will require at some point in your career, it’s important to protect your credit as much as possible. Do not use credit cards to extend your spending capabilities; instead, charge small amounts each month and pay it off regularly. Be conscientious about paying your bills on time.

And, remember that those who make decisions about clearances know that people in the military or in security contracting are vulnerable to the same financial hiccups everyone else is. Frequent moving means that you can wind up upside down on a house. A spouse’s lay-off can cause temporary financial issues. If you are honest about any potential problems and dedicated to improving your credit record, it can go a long way toward improving your odds of getting the clearance you need to move up in your career.