Is the Use of a Credit Score a Valid Screening Criteria for Employment?

Forty-seven percent of employers perform credit checks on at least some jobs in their company and 13 percent do this for all employees, according to a 2010 Society for Human Resource Management study. As of 2010, credit checks are usually valid for screening employment applications. Federal and state privacy laws, however, sometimes prevent the use of your credit history or certain information in it when applying for a job.

Identification

Employers may use credit checks when reviewing your employment application, according to the Privacy Rights Clearinghouse. As of 2009, however, Hawaii and Washington state do not allow the use of credit checks when investigating an employee's background. Also, in states that allow employers to use credit checks, the employer must receive written consent on a separate document to run one.

Considerations

If an employer rejects your application, the Fair Credit Reporting Act requires him to notify you that adverse credit conditions caused your denial, according to the Privacy Rights Clearinghouse. Also, the employer must furnish a copy of the background check if he finds an "adverse" credit history. If you have a bankruptcy, the employer may not take this into account on your job application.

Loopholes

Employers can sidestep FCRA provisions for consent and notification of adverse conditions by conducting a credit check themselves, rather than hiring a third party, according the Privacy Rights Clearinghouse. Alternatively, the employer can find another reason to reject your application, such as having more qualified applicants. As of 2010, California has closed these loopholes.

Tip

The Federal Trade Commissions says that consumers should contact the FTC to file a complaint. The FTC will investigate claims of credit check discrimination and could help you sue companies that violate the FCRA.

Check your own credit report before applying for jobs. All consumers receive one free credit report from each of the three major credit reporting agencies each year. If you find errors, such as delinquent accounts you never opened, you can dispute this with the credit rating agencies.