What is an Employment Credit Check?

Credit Report. Copyright SpiffyJ

 Employers are increasingly running credit checks on job applicants and using that information to make hiring decisions.  A Society of Human Resources Management (SHRM) survey reported that 60% of employers get credit reports on applicants for some or all positions.

What is Included in an Employment Credit Check

An employment credit report includes identifying information, including name, address, previous addresses, and social security number.

It also shows the debt you have incurred including credit card debt, mortgage, car payment, student loans, and other loans and your payment history, including late payments.

The Employer Must Ask Your Permission

Before an employer can get information for employment purposes, the Fair Credit Reporting Act (FCRA) requires that they must notify you in writing and get your written authorization. If the employer is simply conducting inquiries (rather than running reports) they should also ask for your consent.

If you do not consent to the credit check, employers might go forward with the interview process, but they may also reject your application on the spot. Furthermore, federal law allows employers to use these reports as a reason for choosing other candidates.  Some states are proposing legislation to ban some employment-related credit checks, but, to date, no laws been enacted.

Laws Restricting Credit Checks

To date, employment-based credit checks are legal under federal law.

The Fair Credit Reporting Act legally allows employers to check credit reports on both potential candidates and current employees. Employers are required to send a copy of the credit report and written summary to the applicant and to wait a few days for his or her rebuttal or explanation regarding the findings.

Some states have laws which restrict or prohibit credit checks. There are also local laws which prohibit job applicant credit checks. Check with the Department of Labor in your location if you have a concern about bad credit impacting your hireability.

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