Employee Credit Checks

The Fair Credit Reporting Act (FCRA) protects consumer privacy and ensures accurate reporting of consumer information. Employers who run credit checks must do so within the confines of FCRA rules. Overall, an employer can run a credit check on new hires and on employees it is considering for promotion and retention.

Background Check

It is understandable why a company would want to investigate the background of new hires, which is why background checks have become the norm. The FRCA does not cover reference verifications. However, the FRCA does cover references verified by another employer, "reference checking agency" or other credit rating agency (CRA). A typical background check involves verification of past employment, current employment, character references and credit report. A background check can also include drug and fingerprint testing. Jobs handling money or precious items require background checks. Some industries such as brokerage and law enforcement also require background checks.

Credit Check

A business has the right to pull your consumer credit report if it is considering hiring you. A consumer credit report contains all your credit accounts including payment history. It also includes judgments and criminal violations. An employer can deny you employment for having a bad credit score. Many argue the practice of denying a person employment because of bad credit is unfair particularly if she did have good credit at one time but fell on hard times. This becomes a Catch-22 and a hot button for lawmakers. On the other hand, many employers who conduct credit checks are more interested to know if you have a criminal background and not necessarily to find out your credit score.

Your Rights

If the company intends to run a credit check, it must notify you in writing. The company must also get your authorization before obtaining a credit report. If the company runs a credit check and denies you employment, it must provide you with a copy of your credit report and a copy of "A Summary of Your Rights Under the Fair Reporting Act," which is a document prescribed by the Federal Trade Commission. The company is required to provide you with notice of the adverse action either orally, written or electronically. The company must provide a notice with the name and location of the credit rating agency (CRA) used and a statement that the CRA was not responsible for the company's decision. It should also provide a notice informing you that you are entitled to dispute the accuracy of completeness of the information provided by the CRA.

Insight

Finding employment is challenging without the additional stress of worrying that your credit may sink your chances of landing a job. 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: Equifax, Experian, and Transunion. The CRAs established a website, www.annualcreditreport.com, so that consumers can get copies of their credit reports online. Obtain copies of your credit reports and check them for accuracy. Dispute inaccuracies and supply missing or incomplete information. Knowing what's in your credit report makes you better prepared for your job search and provides with an opportunity to explain your credit history to a company looking to hire you.