Who Checks Credit Scores?

Companies use credit scores to make financial predictions about potential customers. The scores are seen as indicators of whether a consumer will repay a loan or file an insurance claim. However, job seekers also may find that their credit ratings are being scrutinized if credit checks are part of a company's hiring process.

Creditors and Lenders

Your financial decisions and management of your credit and loan accounts mostly determine who checks your credit score. Creditors and lenders obtain copies of your credit reports and check your score when you apply for loans and credit cards or seek credit-limit increases on accounts you already have. A consumer who seeks to refinance a loan also is subjected to a credit check as the lender determines whether the consumer's credit rating meets the terms for refinancing.

Employers

Employers increasingly are scrutinizing job applicants' credit histories, especially when people apply for positions that involve handling cash or company finances. Some companies also run checks on their current employees. Employers may check the credit ratings of workers who are being considered for a promotion or reassignment. In any case, the U.S. Fair Credit Reporting Act prohibits employers from checking workers' and job applicants' credit ratings without their written consent. Therefore, people should carefully read job applications and employee contracts to avoid unintentionally authorizing a credit check, which may be outlined in an application or contract.

Insurers

The U.S. Federal Trade Commission (FTC) website notes that auto and homeowners insurance companies look at credit scores to determine whether to issue policies. Insurers use the scores to predict whether a consumer is a good insurance risk. According to the FTC, people with high scores usually pay lower insurance premiums. Insurers use credit scores and other information to predict a consumer's likelihood of filing an insurance claim. A Bankrate article titled "How Insurance Scores Affect Insurance Rates" reports that the Insurance Information Institute indicates that drivers with low credit scores file about 40 percent more claims than drivers who have high scores.

Considerations

Lenders and others who review your credit history may not obtain the same scores, because there are several types of scoring methods. Therefore, people who check their credit scores themselves may not see the same scores lenders, creditors and insurers use. The FTC says each company may develop its own scoring methods or use a scoring model developed by a credit-scoring company. In any case, consumers can maintain good credit ratings by paying their bills on time and not using all the credit available on their credit cards. A late-payment history and large amounts of credit-card debt often lower people's credit scores.