Employers Use Credit Reports to Hire and Fire

Job seekers today are discovering that employers are interested in a lot more than their résumés. Many companies routinely check credit reports on current and prospective employees. Whether you’re a new hire or 20-year veteran, your employer may check your credit history.

This screening practice is growing due to the increased security concerns companies face. Employers generally check credit histories of those applying for management and executive positions, as well as those who will have access to cash, assets, a company credit card, or confidential information. More companies check backgrounds because the reports are easy to get and relatively inexpensive.

Employers obtain your credit report by paying a fee to a consumer reporting agency or employment background check agency. They use the information to verify your identity and employment history. Some employers also look at how much you owe on loans and other debts and whether you’ve been late on payments, had accounts sent to collection, or declared bankruptcy. They use these as indicators of your ability to manage your affairs and see how the salary will match up against your monthly payments.

While this practice is perfectly legal, you should be aware of your rights. Some observers have raised concerns about fairness in the hiring process. The Fair Credit Reporting Act (FCRA) and state laws regulate how employers get and use your information. Employers must notify you they’ll be checking your credit report and wait for your written permission. You may elect to refuse a credit check, but it could cost you the job.

Employers can use credit problems such as defaults or collections actions against you in the hiring process. However, before they eliminate you as a job candidate or fire you because of your credit report, they must give you a pre-adverse action disclosure. After they give you a copy of your credit report and a written summary of your rights under FCRA, they also must give you an adverse action notice that explains why you’re no longer being considered. You also should receive the name and contact information for the agency that provided your report, so you can dispute inaccurate information.

An employer cannot use bankruptcy as a reason not to hire or promote an employee, according to the Federal Bankruptcy Act. In compliance with state and federal laws, employers cannot violate discrimination laws in any aspect of employment, including hiring.

Get a copy of your credit report before you interview to avoid any surprises. The Fair and Accurate Credit Transactions Act (FACTA) now requires the three nationwide consumer reporting agencies–Equifax, Experian, and TransUnion—to provide consumers with a free copy of their credit report every year (annualcreditreport.com). If you think a company violated the FCRA, contact the Federal Trade Commission at http://www.ftc.gov or by calling 877-FTC-HELP.

And remember that the people at your credit union are here to help you build and protect your credit record, by offering loans at fair rates and counseling if needed.


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