When Employers Can Run Job Applicant Credit Reports

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What type of information is in your credit report and why is it relevant to employment? The contents of your credit report can hamper your job search, and it can be grounds for knocking you out of contention for a job.  Especially when it comes to jobs where managing money, handling financial transactions or protecting confidential information is involved, bad credit can be an issue.

Legal Status Regarding Use of Credit Reports in Employment

Most states allow the use of credit reports by employers. However, there are ten states that limit the use of credit information by employers in the hiring process including California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington.  Many other states have legislation pending that might prohibit the use of credit reports by employers or place restrictions upon their use.  Contact your State Department of Labor for information about how current laws apply to your location.

How to Protect Your Credit Report Rights

Tripp Scott, labor and employment attorney for Catalina Avalos, supplies the following information on credit reports and tips for job seekers to protect themselves from credit checks by employers.

General Credit History Information

  • Information from credit report must be used only for purposes requested.
  • Employee has the right to know if any adverse action was taken as a result of information on the credit report; (disclosure is required even if credit report information was not the main reason the applicant was turned down).
  • Disclosure does not have to be in writing, but it is a good idea for an employer to keep a record of the written notification.
  • An employer must provide the employee with the name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency, if the agency compiles and maintains files on consumers on a nationwide basis) that furnished the report to the employee and,
  •  An employer must provide a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken.
  •  Employees have the right to contact the credit reporting agency providing the employee's credit report and attempt to correct any negative information.
  • Employees may re-apply for the job if negative information is corrected and there were no other grounds for being denied employment.

    Job Applicant Credit Report Tips

    • Have an accurate and truthful resume.
    • Familiarize yourself with the information contained in your credit report.
    • Determine if there is any negative information in your credit report.
    • Attempt to correct the negative information in your credit report prior to seeking employment. Correcting negative entries can be time-consuming and frustrating.
    • If an employer informs you that they will conduct a credit check, be prepared to decide between withdrawing your application for employment or pursuing the job.
    • If you are denied employment based on information on the credit report, speak to the employer to see if you may re-apply.

    Credit Discrimination Issues

    • Credit history checks may have the potential of having a disparate impact on minorities.
    • The Equal Employment Opportunity Commission (EEOC) can scrutinize employers, using credit history checks to disqualify prospective employees, in order to determine if the employer's practice is a facially neutral practice linked to job-related criteria and/or is a business necessity.

    Liability for the Employer

    • An employer who unlawfully uses information from an employee's credit report may be subject to criminal penalties.
    •  An employer may also have exposure to civil penalties and liable for attorney's fees.

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