Background and credit checks are scary parts of the job application process. Even if you have no reason to fear what an employer might find, it’s unsettling to have someone comb through your personal information.
As a candidate, however, you should know you’re not completely at the mercy of the employer in this situation. You have rights, and failure to respect those rights can land even the mightiest of corporations in some pretty hot water.
Why Employers Request Credit Checks
When you apply for a job, you submit your previous work history along with basic personal details like your Social Security number and birthdate. The employer may use that information to perform a background check, which can include both legal and financial information.
An employer can also order a credit check, which will reveal your current and past debts along with any bankruptcies, defaults, or judgments. Employers can then consider this information when weighing your candidacy. An employer’s credit check is similar to the report a lender might use to approve or deny a loan, except it doesn’t include your credit score.
Most companies only care about your credit history if you are applying for a job that requires handling money, accounting skills, or bill payment. If you can’t pay your own credit cards on time, an employer might hesitate to hire you for a position that oversees corporate billing, for instance.
Many police officers and other public officials undergo credit checks as well because they are in the position to accept bribes. In theory, someone with a significant debt burden could be more vulnerable to financial persuasion.
Employers can perform credit checks on existing employees as well as prospective ones. If they discover something on a current employee’s credit report, they can use that as grounds for dismissal.
What Are My Rights?
According to the Fair Credit Reporting Act (FCRA), there are limits on what a current or prospective employer can do with your credit information.
For example, a bankruptcy can’t be used as a reason to terminate employment or revoke a job offer. The company also has to alert you ahead of time if it is going to run a credit check. The organization needs your express permission to do so, and the form requesting this permissions must be made obvious to you. That means an employer can’t sneak a credit-check request in with other less important forms, and the company has to explicitly state its intent to check your credit.
Once the check is performed, the company must provide you with a copy of the credit report. You do have the right to decline a credit check, at which point the company is allowed to immediately withdraw a job offer if one has been made.
Some states have laws that supersede the FCRA. For example, the Stop Credit Discrimination in Employment Act in New York prevents most companies from conducting credit checks.
If an employer finds negative information in your credit report that disqualifies you as a candidate, the company must give you notice of this. You are entitled to a fair amount of time to explain or dispute the information. An employer is not allowed to make a decision without you being given a copy of the credit report and the document, “A Summary of Your Rights Under the Fair Credit Reporting Act.”
How to File a Complaint
Many employers and third-party background-check companies have faced huge fines in recent years for violating the FCRA. Because applicants often provide their Social Security numbers to potential employers, these companies have the ability to run a credit check without permission. Conducting credit checks without prior approval is one of the most grievous offenses under the FCRA.
You can file a complaint if a company did not give you a chance to explain or dispute the information in your credit report, or if you signed a credit check release form without being explicitly told what you were signing.
Complaints can be filed with the Federal Trade Commission online at www.ftc.gov, or by calling 1-877-FTC-HELP or 1-866-653-4261 for people who are deaf or hard of hearing. Be sure to have all the relevant details ready, such as when you applied for the job, when you were denied the position, and the reason given for the dismissal of your application.
If your state has a specific law regarding employer credit checks, you should contact the state department responsible and file a complaint there. Contact your local employee rights departments to find the right office.
James Garvey is CEO of Self Lender.
This article is for informational purposes only and does not constitute legal advice.
James Garvey is the CEO at credit-building app Self Lender. Specialists in credit-builder loans since 2014, James and Self Lender have helped hundreds of thousands of people get started with credit online in all 50 states.