What You Must Know About Checking an Applicant's Credit Information

Throughout the interview process, you are working to gather information about prospective employees. This information will help you decide whether they would do well in the open position and in your company. Many employers run pre-employment background checks on candidates to help determine how they’d fit in at the work environment.

In certain states and under specific circumstances, you can check the credit information of job applicants. This extra information may give you an insight that the pre-employment background check doesn’t. Learn when you can check an applicant’s credit information and what you have to watch out for.

Federal Laws

The federal law works to protect employees from discrimination. The Fair Credit Reporting Act (FCRA) sets up federal standards for employers regarding checking an applicant’s credit information. According to the FCRA, an employer is under these restrictions:

• Employers have to be in compliance with FCRA requirements and cannot use the information to violate federal or state equal opportunity laws.

• A consumer reporting agency cannot furnish a credit report unless the employer has obtained an applicant disclosure form that was not a part of another document.

• An employer needs prior written authorization from an applicant or employee to get any credit information.

• The employer has to provide a copy of the report to the applicant or employee along with a written description of his or her rights according to the FCRA before the employer can take any negative action.

• A credit report for an employer cannot include bankruptcies from 10 or more years ago; accounts targeted for collection if seven years have passed; paid tax liens from seven or more years ago; civil lawsuits, arrest records and judgments from seven or more years ago; and any other negative information older than seven years.

Make sure you get express, written consent before you check an applicant’s or employee’s credit information.

State Laws

The state laws are a little harder to discuss because they will vary from state to state. Currently, only a few states have passed laws that limit an employer’s ability to access credit information or conduct pre-employment credit checks. These states include, but are not limited to, Hawaii, Illinois, Oregon and Washington.

Before you take any sort of legal actions in this regard, make sure to work with a local business attorney. He or she will be able to give you the information you need, so you will know whether you can legally check an applicant’s credit information.

Equal Employment

Finally, you have take steps to avoid discrimination. The Equal Employment Opportunity Commission (EEOC) can file lawsuits against employers who misuse their ability to perform credit checks and pre-employment background checks. To stay in the bounds of equal employment regulations, you should consider limiting these types of checks to positions that require them.

If you are hiring an employee who will be involved with financial management, it is realistic that you will want someone with a good credit history. If you are hiring someone for a janitorial position, you will likely not be able to legally perform such checks. You should also make sure to perform a pre-employment background check or credit check without discrimination. That means you should or should not perform these checks regardless of race, gender, national origin or age.

For example, you can’t check Applicant A’s credit information because he or she is a heterosexual, single male and not check Applicant B’s credit information because she or he is a homosexual male in a serious relationship. Be consistent about the positions you are performing these types of checks for without discrimination.

Work With a Lawyer

To make sure you are following all state and federal regulations, work with a business attorney. He or she will be able to guide you through the entire process.

Legal Disclaimer

The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.