A Guide to Credit Checks for Employment: Credit Report vs. Credit Score

June 14, 2022
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Checkr Editor

learn the basics of credit scores and credit reports.

When making financial decisions like taking out a loan, applying for a credit card, or running a credit check on a top candidate for a role, the terms credit score and credit report come up a lot. Both are essential components of understanding a person’s financial profile.

You likely already know that one is based on the other (a person’s credit score is based on the information in their credit reports), but how does the process work? In order to fully understand a credit report vs. credit score and the role they play in the hiring process, it’s important to understand the basics of each.

These two pillars of financial literacy are important for employers and candidates alike. Both parties must be aware of the difference between a credit report and credit score when a background check is performed.

So, what is the difference between a credit score and credit report?

What is a credit report?

The difference between a credit score and credit report is that a credit score is just one number, while a credit report provides detailed information on a person’s financial history. It includes information like:

  • Identifying information
  • Credit accounts
  • Credit inquiries
  • Public records
  • Delinquency

When reviewing a credit report, you can easily see the number of active accounts, outstanding balances, and various other details.

Does a credit report show a credit score?

Does a credit report show your credit score? A credit report represents a variety of financial information such as debts and payment history. However, no, it does not show a specific credit score.

There are three major reporting bureaus: Equifax, Experian, and TransUnion. Depending on the credit reporting bureau providing the report, each will look slightly different. Remember, businesses aren’t obliged to report to each of the three credit bureaus (or any of them for that matter).

How does a credit report work?

A credit report is a detailed record of someone’s financial history, compiled by the three major credit-reporting companies mentioned above. The report is divided into four key categories:

  • Identifying information
  • Credit inquiries
  • Credit accounts
  • Public records

Credit reports are often many pages long as they reflect open accounts, the payment history of each, any outstanding debts, and much more. It’s important that consumers review their credit reports regularly in case there are errors. If an error is found, it can be disputed by the consumer online, via phone, or by mail.

Employers will sometimes check a candidate’s credit history for signs of financial distress, fraud, or due to requirements for the position (e.g. roles that require security clearance, sensitive customer data, access to money, or confidential information about the company).

When checking credit history, employers will not receive the candidate’s full credit report. They’ll receive a modified credit report, which does not include any account numbers or information that could violate employment laws such as age, race or marital status. Typically, this report shows the candidate’s payment history, any outstanding debts, and available credit.

What is a credit score?

Lenders use credit scores to rank applicants on a scale quickly and easily. Lenders prefer to use a credit score because they’re often not interested in the specifics, but rather they want to quickly assess the financial history of a person. A single number allows them to determine whether they consider that person as a suitable candidate for credit.

How do credit scores work?

Credit scores are derived from credit reports, based on a variety of factors (more on what makes up a credit score later). FICO and VantageScore are the two main scoring companies that calculate credit scores. While someone may have two different scores from each, chances are they’ll be similar as both FICO and VantageScore use the same factors to calculate credit scores.

Credit scores range from 300 to 850. The higher the credit score, the more lending opportunities are available. Generally, anywhere from 670 to 720 is a “good” credit score. Anything higher than 720 is viewed as an “excellent” score.

So, what makes up a credit score?

  • Payment History – 35%
  • Outstanding Balances – 30%
  • Length of Credit History – 15%
  • Credit Mix – 10%
  • New Credit – 10%

The longer a person’s credit history runs back, the higher their score will be. This is why many people who have never taken out a credit card or a personal loan before have lower credit scores.

Employers may run a credit check on candidates when performing a background check, but do not have access to a person’s credit score. As discussed earlier, they only have access to a modified credit report. When an employer checks a candidate’s credit history, it’s considered a soft inquiry and does not affect their score.

Credit report vs. credit score: a summary

The relationship between credit report and credit score is a close one as they are inextricably tied, but it’s important to understand how they differ. Here’s a roundup of the key differences between a credit score vs. credit report:

  • Representation – A credit report contains the full details of a person’s credit history, whereas a credit score is a single number.
  • Process – Credit reports are derived from information supplied by businesses and creditors. Scores are based on the data the three credit reporting bureaus use to determine the credit score.
  • Use – Lenders typically prefer to rely on credit scores, whereas employers running a credit check have access to modified credit reports.
  • Availability – Everyone can request a free copy of their own credit report annually from each reporting bureau.
  • Hiring – While employment credit checks don’t display a person’s credit score, employers may gain access to a modified version of someone’s credit report.  

Partner with Checkr

Understanding the differences between a credit report vs. score isn’t important just for your own personal finances, it can also be important for the hiring process. While employers typically choose to perform credit checks when a role involves dealing with finances or sensitive data, businesses may have blanket policies of incorporating credit history into their background checks if it is appropriate or required for the role.

Checkr believes in fair hiring practices for employers and employees. For background check services that support candidates and employers in conducting compliant background checks, sign up with Checkr today.

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