What do employers look for during credit checks?

[jthompson5254]

I am in the running to get a Pharmacy Technician  job in a small local hospital (thought they are part of a big network). They will be running a background (no problems there) and a credit check. I have no lates or any "baddies" but I do have a high debt to credit ratio. My current score is in the 685 range. I might be able to pay $500 bucks towards the total $6900 that I currently owe before they run it . Is it better to pay off my small $500 credit limit account or try to get my overall ratio down (Its at 80% now). Or from a employment standpoint does it even matter.

[haulingthescoreup]

For that position, I don't think that util is a factor. I'd say that they're looking more for things like a pattern of serious negative stuff like collections and charge-offs. There is a pretty common belief that "irresponsible" handling of personal finances predicts irresponsible employee behavior.

To my knowledge, no one has ever done a formal study correlating credit history to employment reliabillity, and my personal belief is that employers should not be able to pull our credit reports. There have been studies finding that credit scores predict insurance claims behavior. I'm not thrilled about that either, but at least there's some research involved. But there's nothing similar for employer pulls.

For me, the huge problem (besides privacy issues) about potential employers pulling credit reports is that I doubt very seriously that anyone in your basic HR office knows how to interpret what's on reports. Take the common example of a divorced parent having a dozen medical collections on his/her reports. That is often the result of the custodial parent taking the kid to ER's or whatever, and when the insurance company won't pay the full bill, the rest is sent to collections, and the non-custodial parent never knew anything about it in the first place. Someone unfamiliar with the vagaries of credit would think that the job applicant was a deadbeat who can't be bothered to pay bills, and they might thumb down accordingly.

FWIW, my new employer pulled my TU report. (Ha, silly employer, TU stopped listing all my lates over 4 years old; no idea why. ) It is coded as an employer pull, and I did not get a ding for a hard inq.

[MattH]

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@jthompson5254 wrote:

I am in the running to get a Pharmacy Technician  job in a small local hospital (thought they are part of a big network). They will be running a background (no problems there) and a credit check. I have no lates or any "baddies" but I do have a high debt to credit ratio. My current score is in the 685 range. I might be able to pay $500 bucks towards the total $6900 that I currently owe before they run it . Is it better to pay off my small $500 credit limit account or try to get my overall ratio down (Its at 80% now). Or from a employment standpoint does it even matter.

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I doubt they care much about utilization, I would think they mostly care about signs of previous financial difficulties such as numerous baddies.  If you have any concerns, though, the general rule is: employers are happier when they learn anything negative directly from you before they learn it from any other source.  Furthermore, if you bring up a concern you may be able to supply context that other sources would not.

[vanillabean]

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@haulingthescoreup wrote:

For me, the huge problem (besides privacy issues) about potential employers pulling credit reports is that I doubt very seriously that anyone in your basic HR office knows how to interpret what's on reports.

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That could be. And there are areas that I, with a status of a valued contributor in these forums, know positively nothing about, such as anything related to baddies. Which reminds me of stumbling across an old thread the other day, in which RobertEG clarified the difference between a charge-off and a collection. I was so excited because it opened up a new world for me. His core posts should be obligatory reading for any HR office.

[RobertEG]

I think I can give you some insight from the most bureaucratic of all worlds, and that is federal employment.  I am a retired senior executive from the federal sector, and have been involved in thousands of background and credit checks. both for new and existing employees.  I do see the legitimacy for credit checks, but only in some situations.  It is not, in my mind, any general correlation of job performance with credit history.  It is, rather, in my mind, trying to prevent the one rotten apple in the barrell.

I know that you are not applying for a federal job, but some of the philosiphies carry over.

All jobs carry at least some personal level of trust, and thus the need for basic criminal background checks.

Beyond that, in the federal sector, for example, each job is assigned, formally by OPM, with a security risk level.  Some are classfied based only on your level of supervisory authotiy being granted by the employer.  LOw-level supervisory postions are not policy postitions, and thus are unlikely to commit the employer to monetary harm.. They dont need routine credit checks, and those are not routinely done. 

But as the level of supervisory and management responsbibilities and authority for the job increases, so does the potential threat to the employer.  Particulary if the postion involves financial/feduciary responsibily at any management level. 

Now, the top of the tier... those that DEFINATELY justify credit checks   Those jobs that requrie the grant of a national security clearance.  They will always get a full credit report.  One with a credit score of 560, maxed out on credit, with collections, is not a good security risk. 

In your case, you are applying for a position as a Pharmacy Tech with a hospital.  That is a postiion, at least in my opinion, that warrants a HIGH degree personal trust.

You will have access to drugs that, without a presecription, are illegal to dispense.  I personally would want to know that my pharmiscist is not so highly in debt that they might succumb to the enticement to overlook a "minor" dispensation of drugs if it had the major incentive of easing their personal debt. It raises the potential risk to the employer.

So, yes, my opinion is that the position you are applying for warrants a pull of your CR. It is not,, in my opinion, an invasion of personal privacy when you ask them to grant you a postition of high trust.  If you were applying for a job to flle books in your local library, then no, I would see no substantial correlation between your credit score and employment consideration

[MattH]

In addition to credit checks and police records checks, there also exist some industry-specific issues.  For instance, I am in pharmaceutical research and development, which means we are subject to FDA regulation.  The FDA maintains a list of individuals who have been caught falsifying scientific data submitted to the FDA; we must certify that we regularly check this list and if we discover one of our employees is listed immediately fire that person because nobody on that list is allowed to work for us in any capacity.  We also must require all our contractors, including the companies who clean our floors and operate our cafeterias, to check the FDA list because we must certify to the FDA that nobody on that list does any work for us whatever.

[vanillabean]

Still, if a credit check is defined as access to your credit reports and your scores, it will also tell you whether your util is 3% or 7%. That's of no interest whatsoever and beyond the purpose of access to needed information. If you're interested in baddies, then accessing those alone should do it.