Credit Reports, Credit Scores,
Credit Reporting - All 3 Bureaus

You are Here: > Employee Credit






Employee Credit Checks

Most consumers are familiar with the power of good credit.  What many don’t know is that lending is not the only arena that calls for a strong credit history.  Growing numbers of employers are ordering consumer reports to perform employee credit checks on hopeful applicants.  Oftentimes a consumer report contains information about your credit history and personal character including items such as public records, driving records and criminal history. 

This practice of using the credit report in employee credit checks is one that angers and provokes some individuals who feel it may be a privacy violation.  Some sources even point out that credit may not be the best predictor of workplace theft; criminal history in tandem with bounced checks may be more effective.  Despite this point, many employers continue the practice of using credit history as a background check to avoid candidates with high debt and financially irresponsible tendencies. 

Luckily, there are standards for employee credit checks, set forth in the Fair Credit Reporting Act (FCRA) in Sections 604, 606, and 615.  These standards have been in effect since September 30, 1997, and were designed to serve two primary purposes. 

The first is to make individuals aware that consumer reports can be used for employment purposes, but the job applicant must agree to the use. 

Second, the act hopes to ensure that individuals are immediately notified if information within the report may cause a negative employment decision. 

Employers are required under FCRA to take certain actions in the event that you are subject to a background check and if the consumer report has a negative influence on your employment (hiring or promotion). 

  • First, employers are required to obtain written consent from an applicant before ordering his/her consumer report.  Employers only need your written consent once to pull a report if you sign a separate document notice that indicates reports may be obtained during the course of your employment. 
  • If you are denied employment or a promotion based on information in your credit report, your employer is required to provide you with a pre-adverse action disclosure, which must include a copy of your consumer report and a summary of your rights under FCRA.
  • Once a person is hired for the position you applied for, your employer is required to provide you with the name, address, and phone number of the credit reporting agency (CRA) used to obtain your consumer report.  Your employer must also make clear that the CRA is not responsible for the hiring decision made. 
  • You should receive a notice explaining your right to dispute the accuracy and/or completeness of the information on the agency’s report.  If you choose, you are also entitled to access your report again within 60 days. 

These procedures must be followed any time a consumer report is a factor in the process of deciding one’s employment.  Individuals are able to sue employers for damages ensuing from deliberate violations of their aforementioned obligations under the law. 

There is also certain information employers are legally not allowed to access or ask for in a pre-employment background check.  For instance:

  • Bankruptcy cannot be held against you; it is illegal for an employer to cite this as a reason you were not hired, fired, or not promoted. 
  • School records, like transcripts, grades, and recommendations, are confidential under federal law.  These can only be accessed with the student’s consent.
  • Laws vary among states, but some states prohibit employers from inquiring about arrests, convictions, juvenile crimes, and sealed records. 
  • Employers are only allowed to access information regarding a worker’s compensation appeal if the injury has the potential to interfere with duties on the job.
  • Employers cannot request medical records; however, they may ask about your ability to perform a job. 
  • Service records of members and former members of the military are private, but the military may disclose your name, rank, salary, duty assignment, awards, and duty status without consent. 
  • Finally, driving records can be released without consent, because they are public records.