A Company's Right to Pull Credit Reports

A company can deny you employment because of your credit report. A company has the right to pull your credit report if it is considering hiring, retaining you or offering you a promotion. A company's right to pull credit reports of prospective hires falls under the category of background checks. However, employee credit checks must fall within the confines of the Federal Credit Reporting Act rules.

Background Check

Background checks have become the norm for today's job seekers. It is understandable why a company would want to know a little more about you before it makes a hiring decision. Some industries such as law enforcement and brokerage industry require background checks including fingerprinting. Typical background checks involves past employment verification, current employment, character references and a credit check.

Your Rights

The Fair Credit Reporting Act (FCRA) ensures accurate and fair reporting of consumer information by the credit rating agencies. The FCRA also covers reference checks by another employer but not personal references. If a company intends to run a credit check on you, it must notify you and receive your authorization. If the company denies you employment, the company must provide you with a copy of your credit report, along with a copy of "A Summary of Your Rights under the Fair Reporting Act," a document by the Federal Trade Commission. The company must also provide you with the name of the credit rating agency (CRA) it used to make its decision and issue a statement that the CRA was not responsible for its decision. Finally, the company must notify you of your right to dispute the accuracy of the information provided by the CRA.

Credit Check

The fact that a company can refuse to hire you because of a bad credit seems unfair. It is a Catch-22 for a job seeker who may have had good credit at one point but has fallen on hard times. However, many argue that when a company runs a credit check it is more interested in whether you have a criminal background. They argue that a bad credit score is much better than having criminal violations. You may be able to explain your bad credit score but have a harder time explaining away violations. However, once hired, a company cannot use a credit check to fire you. For example, if your employer runs a credit check during your course of employment, it cannot fire you if it learns that you filed for bankruptcy.

Insight

Get a copy of your credit report before you start your job search. The Fair and Accurate Credit Transactions Act (FACTA), an amendment to the FRCA, allows consumers to obtain a free annual report from the credit rating agencies. The CRAs --- Equifax, Experian and Transunion --- established a website, www.annualcreditreport.com, so consumers can get free copies of their credit reports. Check your credit reports for accuracy. Dispute inaccuracies and supply missing or incomplete information. Knowing what's in your credit report provides you with an opportunity to explain your credit history to a company looking to hire you.