Accuracy of Employment Credit Checks

Employers that use credit reports tend to pull them from three major, private credit reporting agencies, but most of these reports contain at least one error, according to a 2004 U.S. Public Interest Research Group study. The high rate of errors means it is critical for job seekers to review their credit reports and correct mistakes before looking for a job.

Identification

The only difference between an employment credit check and consumer credit check is that an employment credit check does not include an applicant's name and credit score, and the bureaus do not list the inquiry on the person's credit history. Equifax, Experian and TransUnion provide the majority of employment and consumer credit checks, according to the Privacy Rights Clearinghouse. The commonly cited U.S. PIRG study claims that 80 percent of credit reports contain at least one error.

Considerations

As of the date of publication, the Federal Trade Commission is in the process of completing a study of the accuracy of credit reports, which the agency should complete by December 2012. In the meantime, a few states, such as Illinois, bar employers from eliminating candidates from consideration from a job based solely on the applicant's credit history. Also, the FTC issued an interim report in December 2010 that declared the issue of credit report accuracy as so questionable that employers should exercise extreme caution when taking into account a job applicant's credit history.

Benefits

Inaccuracies in a credit report can benefit a potential applicant. For example, a 2009 study by the Consumer Federation of America and the National Credit Reporting Association found that 20 percent of consumers with a score in the range of 575 of 630 benefited from reporting errors, such as the bureaus omitting a collection account or civil judgment. On the other hand, 20 percent of people in that same score range had errors that damaged their credit history.

Tip

The federal government requires the national credit reporting bureaus to give consumers one free report each year under the Fair Credit Reporting Act via Annual Credit Report. Consumers can dispute anything, even incorrect demographic data like job history and telephone number. If a consumer wants to dispute an item on his report, he should identify the problem, such as by printing off a report and highlighting the error, and including evidence to support his claim, such as a copy of a canceled check. Sending a certified letter guarantees the bureaus receive a dispute claim and that the consumer has record of each bureau accepting the letter.