Fair Credit Reporting Act (FCRA) and Background Checks
When employers conduct a background check (including credit, criminal, and past employer checks) using a third party, the background check is covered by The Fair Credit Reporting Act of 1970 (FCRA).
Learn more about FCRA and how it impacts any background checks done by employers. Also, read below for general information about background checks and your rights as related to them.
What Is the Fair Credit Reporting Act (FCRA)?
The FCRA is federal legislation designed to promote fair, accurate, and private background checks and other consumer reports. FCRA oversees the collection and use of consumer credit information.
What Is a Background Check?
A background check is a review of someone's records. These reports can include credit checks, driving records, criminal background information, and other documents that show an employee's history.
Employers usually, though not always, conduct some type of background check on job seekers through a third party organization, though they may not check all elements of your background. Typically, they only conduct checks on people who are far along in the application process.
A background check helps an employer verify information shared by a job seeker and uncover any vulnerabilities, such as indebtedness or a criminal history, that might make it more likely the candidate would act unethically on the job.
When employers use a third party to conduct background checks, they must adhere to the FCRA and Equal Employment Opportunity Commission (EEOC) regulations.
Types of Background Checks
Below is a list of types of background checks that employers may conduct:
- Credit check
- Employment history verification
- Drug tests
- Criminal records
- Academic history verification
- Driving record
- Educational verification
- Social security verification
- Personal and professional references
FCRA and Employment
FCRA shapes the way employers can ask for, receive, and use a background check from a third party. Employers are subject to certain expectations and laws before reviewing any consumer report in the case of hiring new employees.
Before an employer can get a consumer report for employment purposes, they must notify you in writing and get your written consent.
If an employer decides not to hire you because of your report, they must give you a pre-adverse action disclosure that includes a copy of the report and a copy of your rights.
They must then give you notice that they have decided not to hire you and let you know the name and address of the Consumer Reporting Agency and information on your right to dispute the report.
If an employer is asking a third party company to provide an investigative report—a report based on personal interviews concerning a person's character, general reputation, personal characteristics, and lifestyle—then they must also tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.
Furthermore, a person has the rights to all records in his or her name and can ask the credit reporting agency to disclose his or her file. He or she can ask for a credit score, dispute inaccuracies or confusion, or seek damages from companies that violate his or her rights.
FCRA and State Law
While FCRA is a federal law, many states have their own laws when it comes to consumer reports. As a result, a person may have more rights under state law, depending on his or her jurisdiction.
Consult your state department of labor for information on laws in your location.
Illegal Use of Background Checks
Employers cannot use background checks to discriminate. Hiring discrimination refers to an employer making a hiring decision based on race, national origin, sex, religion, disability, genetic information, or age.
If you suspect a background check by an employer has been used in a discriminatory way, contact the EEOC.
Saying No to a Background Check
Background checks are becoming more and more common among employers during the job hiring process. While you can say no to a background check, an employer may choose not to hire you because of this.
However, if you are asked to fill out information for a background check early on in the process (such as during an initial interview), and are uncomfortable with that, you could always ask if you could fill it out once you and the employer have both decided whether you are moving forward in the job hiring process. However, keep in mind that the employer could reject that request.
Generally, prepare for a number of requests for background checks during your job search process.
Preparing for a Background Check
Are you ready for an employer to check your background? If you are job searching, it's a good idea to know about any red flags on your record, so you can plan how to handle them.
The best way to prepare for an employment background check is to be aware of the information an employer might find in advance.
Request a free copy of your credit report from a reporting agency so you know its contents. Contact the agency to correct any erroneous information. If you are concerned about other aspects of your background, consider running an online search on your background to anticipate any problem areas. If you have used drugs in the recent past, review information regarding drug testing to prepare for any issues.
You will need to decide whether to preemptively volunteer any information regarding red flags that will show up in a background check.
There is no imperative to share information that may detract from your candidacy unless you are directly questioned about that aspect by an employer. If you do decide to explain any issues, you should generally wait until an employer mentions they are conducting a background check and requests your permission to proceed or at least until you have made a favorable impression through the interview process.
Keep your explanations short, and focus on how you have made changes to overcome any problems. For example, if your credit score is low but impacted by a spouse and you have subsequently separated, you might mention those circumstances.
The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law.