Which of the following requires insurers to disclose win an applicant consumer or credit history is being investigated?

Applying for a new job means perfecting your resume, writing a cover letter and preparing for an interview. But there's something else you should work on before submitting your next job application: your credit.

According to a 2018 HR.com report sponsored by the National Association of Background Screeners (NABS), 95% of companies conduct some type of background check on potential employees — 16% pull credit or financial checks on all job candidates and almost one-third do credit checks on some candidates.

While your next employer may take a look at your credit history, unlike lenders, they cannot see your credit score (or your credit account numbers). This is one of the most common myths about credit scores. But it's worth knowing what employers can see when they do a credit check.

Your credit report vs. your credit score

First, let's break down the difference between your credit report and your credit score.

Your credit report details your credit history, including any credit card account information, your balances, your available credit and your payment history. Your credit score is a 3-digit number that basically sums up that information into a rating. A good credit score means you're a good credit risk (more likely to repay a loan), whereas a low credit score means you're a poor credit risk.

Why would a potential employer look at your credit?

More than half of employers conduct background checks during the hiring process only, and the No. 1 reason (at 86%) is to protect their employees and customers, says the 2018 HR.com report.

For security purposes, the credit report can be used to verify someone's identity, background and education, to prevent theft or embezzlement and to see the candidate's previous employers (especially if there is missing employment experience on a resume). For employers, it is a big picture snapshot of how a potential candidate handles their responsibilities.

"Credit reports indicate whether or not you're responsible," financial expert John Ulzheimer, formerly of FICO and Equifax, tells Select. "And, they also indicate if you're in financial distress. These are attributes that are important to employers. For example, would you want to hire someone in your accounting department who can't manage their own obligations?"

If an employer is running a credit check on you, it is most likely only after they already made a decision to hire you, and it is usually the last thing they check. Since pulling credit checks cost employers both time and money (many outsource to a third-party company), credit checks aren't necessarily used to weed out a big pool of potential applicants and not all applicants will have their credit checked.

Employers are more likely to run a credit check for candidates applying for financial roles within a company or any position that requires handling of money (such as accountants or retail roles).

What do employers see when checking your credit?

"They see largely what a lender sees, except for your credit score," Ulzheimer says. (Employers also don't see your date of birth.)

Since a lot of the credit report data that lenders and employers see is the same, employers have access to a comprehensive background report that includes, in addition to your credit history, your past employment, insurance and legal activity.

Though prospective employers don't see your credit score in a credit check, they do see your open lines of credit (such as mortgages), outstanding balances, auto or student loans, foreclosures, late or missed payments, any bankruptcies and collection accounts.

Does an employer credit check hurt your credit score?

Your credit score won't be affected by a potential employer conducting a credit check on you.

"An employment inquiry is treated like a soft inquiry," Ulzheimer says. "Not visible to other parties (other than you) and not considered in credit scoring systems."

According to the 2018 HR.com report, employers typically assess applicants based on their long-term credit history — four to seven years overall — unlike lenders. That means if there is a big discrepancy from a few years ago, an employer may still ask you about it even if your most recent credit history is healthy.

What are your legal rights as a job applicant?

Thanks to the Fair Credit Reporting Act (FCRA), employers can't go checking your credit history behind your back. They must have written consent before pulling an applicant's credit history.

"Unlike every other credit reporting scenario, you must be given a separate notice indicating the employer is going to pull your credit reports," Ulzheimer says. "And you have to give overt written permission."

In some states, there are specific restrictions when it comes to employers using credit information for employment decisions.

How can you prepare for a credit check by a potential employer?

Since employers are mainly checking to see any patterns or habits of mismanaging money when they conduct a credit check, the best way to prepare is to know what your credit report says before applying to any job (no matter the position).

"You certainly don't want to be surprised when you go apply for a job to learn something negative is on your credit reports," Ulzheimer says. "I always advise people who are job hunting to get a good idea of what your credit reports looks like well in advance. And, be able to explain any negative entries."

Every year, you're entitled to one free credit report from each of the main credit bureaus — Experian, Equifax and TransUnion. You can access these reports for free at annualcreditreport.com, which is authorized by federal law. We recommend you don't access all three reports at the same time, but instead space one report out every four months.

If you have a Capital One credit card, such as the Capital One Venture Rewards Credit Card or Capital One Savor Cash Rewards Credit Card, you may have come across CreditWise (which is open to everyone, even if you're not a Capital One cardholder). CreditWise provides access to your free TransUnion credit report.

Keep in mind that while employers can legally pull your credit report, it's one of many factors that go into getting hired for a new job. But there is a simple way to appear just as good on your credit report as you do in your job interview: Make sure you always pay your bills on time.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Which of the following requires insurers to disclose when an applicants consumers or credit history is being investigated?

What is the name of the law that requires insurers to disclose?

What is the name of the law that requires to disclose information gathering practices and where the information was obtained?

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