Employment Credit Check
Credit checks related to hiring and other employment matters are generally referred to as employee credit checks or employment credit checks.
Can an employer conduct an employment credit check on me?
Unless your work state is among the few that now have so-called "credit check laws" that restrict or prohibit it, then a potential employer generally has the right to conduct an employment credit check to make a hiring decision about you.* A potential employer might check your credit report as part of your employment background check.
A 2010 survey by the Society of Human Resource Management showed that 13 percent of the employers surveyed conduct credit checks on all job candidates, while 47 percent do so only for certain jobs. Only 1 percent consider medical debt, but 11 percent consider home foreclosure.
After hiring you, your employer generally has the right to conduct an employment credit check to make other decisions about you too, such as those regarding promotion, reassignment and retention.
In the absence of a state law that restricts or prohibits it, an employer generally has the right to make such decisions about you primarily because there is no Federal discrimination law that specifically prohibits employment discrimination on the basis of a bad credit report.
Employers obtain job-applicant and employee credit reports through consumer-reporting, credit-reporting or employment background-check agencies. Generally, a credit report includes some to all of the following information; however, employment credit checks typically focus on debt and don't investigate credit scores.
- Year of birth
- Current and previous addresses
- Marital status and spouse's name if applicable
- Current and former employers
- Social security number
- Bankruptcies, liens and judgments
- Child support obligations
- Loan and credit card accounts, and payment history
- Credit scores from the three credit-reporting bureaus
- Who has recently checked the credit report
If your work state does not have a law that prohibits or otherwise regulates an employment credit check on you, then the employment provisions in the Federal Fair Credit Reporting Act (FCRA) rule. The FCRA provisions regulate how employers obtain and use your credit report; for example, generally:
- An employer must first inform you that someone will be conducting a credit check on you and get your permission in writing (unless you work in the trucking industry, in which case your permission might not be required). Technically, you may refuse to allow it; but, in reality, you might not keep your job or land a new one if you do that.
- Before an employer may take an adverse action against you (e.g., eliminate you as a job candidate or fire you) based solely on a credit check, the employer must give you a "pre-adverse action disclosure" that consists of a copy of your credit report and a written summary of your rights under the Fair Credit Reporting Act.
- After an employer has taken adverse action against you, the employer must then provide you with an "adverse action notice" and give you the contact information of the agency that provided your credit report, so that you may dispute inaccurate information.
- An employer must keep the results of your credit check confidential and can't store any information about it in your personnel file.
The Federal Bankruptcy Act might apply too; for example, your employer may not terminate your employment solely because a credit check revealed that you sought bankruptcy protection under the Act.
Even though there is no Federal discrimination law that specifically prohibits employment discrimination on the basis of a bad credit report, an employer still may not use a credit check as a guise to discriminate against you in any aspect of employment in violation of a specific discrimination law that does exist.
For example, an employer may not use bad credit reports as a guise to routinely discriminate against low-income job applicants on the basis of gender or race, in violation of Title VII of the Civil Rights Act.
In fact, the Equal Employment Opportunity Commission (EEOC) cautions employers about using credit ratings and other economic factors in pre-employment screenings, because the practice tends to disproportionately eliminate female and minority job applicants in a discriminatory way.
Thanks to the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), which amended the Fair Credit Reporting Act, all Americans are entitled to see their credit reports for free once per year. If any of the three credit bureaus has issued an inaccurate or incomplete credit report that is making you suffer adverse employment decisions (among other bad things), then you have the right to dispute and correct it.
To do so, consult a credit repair attorney; alternately, do it yourself by following the credit repair guidelines from the Federal Trade Commission (FTC) or make it easier with a do-it-yourself credit repair kit. Whichever route you choose, don't delay, as correcting a credit report takes time and effort, and can be frustrating. In fact, complaints against credit-reporting bureaus are among the most frequent that the FTC receives.
According to the National Association of State Public Interest Research Groups (PIRGs), 79 percent of the credit reports surveyed were inaccurate.
You might have grounds for a lawsuit if you can prove damages from an inaccurate or incomplete credit report or employer misuse of the information, such as loss of employment or a job opportunity as a direct result. Consult an attorney about that. Again, don't delay, as a statute of limitations applies.