Your FCRA Compliance Green Light

RSS header - this is hidden

Can Employers Look at a Job Candidate's Credit Report?

Posted by Ryan Howard on Fri, Aug 10, 2018

Can Employers Check Your Credit Report

Employers run background checks on employees to keep both their business and their customers' interest safe. A basic background check is used to verify a potential employee's identity and determine if there was any past criminal activity. Credit checks aren't necessarily included in a basic screening but would be used if the job description requires it and could affect employment chances. Federal law prohibits employment discrimination based on gender, race, and religion, however as of this writing, only 11 states have limits against discrimination based on credit.

Can an employer look at an applicant's credit report? The answer is, "It depends."

Why Does Credit Matter in a Job?

A credit screening may be necessary when good financial sense is a requirement for a job. For instance, any job description that requires the handling of money or making financial decisions would likely include a credit screening before hiring.  Accounting, credit management, banking and law enforcement are jobs that would require a candidate with good credit. Consulting companies that work with financial organizations may require their employees to have credit checks as well. 

When an employer screens for credit, they are are looking at an applicant's:

  • History of handling money
  • Personal financial decisions
  • Low risk of fraudulent or criminal activity

Can an Employer Look at Credit without Permission?

Just as with any kind of background check, employers are not allowed to pull any information without explicit consent from the applicant. The employer must include a screening consent form that is a clear and separate document from their application. The applicant must understand which screens will be run and that their employment chances are dependent on the results of the background check. If the background check or credit check reveals something outside the norm or requirements for hiring, the applicant will have the chance to review the report and dispute any false or misleading data. Pre-adverse action and adverse action must be in writing and follow the compliance requirements of the Fair Credit Reporting Act

Sample Adverse Action Notice

Does Bad Credit Mean No Job?

Again, it depends on the position. If the job absolutely requires financial trustworthiness, then a bad credit report could affect the  job chances.  The rationale is that an individual with a pattern of unpaid bills, liens, or charged-off accounts could present a greater risk to the organization.  This typically only applies if the job requirement involves handling cash, credit cards, or other financial transactions. 

Before running a credit check or any type of background check, employers must consider if the screens are necessary for the job.  Work with your third-party screening company to determine if a credit check or any other background checks should be required. If these requirements are worked out ahead of time, the employer can save both time and money during the hiring process. 

Topics: Types of Background Checks, Employment Background Screening, Hiring and Recruiting