What to Know About Employer Credit Checks

Your credit report is a very important document that can have serious implications when applying for a job. By understanding how and when an employer can have access to it, you can take the necessary steps to improve your chances of being hired. Here’s everything you need to know:

1. If you live in one of these 11 states, you might be exempt

In most states, employers are permitted to check applicants credit reports as part of their pre-employment screening. However, there are 11 states where that practice is prohibited or limited: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington all have laws regulating this process. (The City of New York has recently enacted legislation that will similarly limit employer credit checks later this year.)1

From high medical bills to the long-term unemployment and housing foreclosures associated with the Great Recession, many Americans’ credit ratings have suffered from factors beyond their own control. For this reason, many states have adopted laws that restrict employer credit checks (with exceptions for those applying for jobs where credit information will have some bearing on their job performance. For example, state laws may have exceptions for situations where the job will have financial responsibilities, or a background check is required by state or federal law for security reasons.)

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2. Your rights under federal law

Even if you don’t live in a state or city that restricts employer credit checks, all companies must still comply with federal regulations contained within the Fair Credit Billing Act (FCRA). This law requires that applicants and employees be informed of a credit check in advance and provide their written consent. The FCRA also requires that you be notified in writing by an employer if it takes any adverse action against you based on this report, and given a copy of the report, which gives you the right to dispute any inaccurate information.2

3. What you should know when faced with a pre-employment credit check

Your credit report is a very important document that has can have serious implications when applying for a job. By understanding how and when an employer can have access to it, you can take the necessary steps to improve your chances of being hired.

First, it’s important to realize that if you agree to a credit check, your prospective employer will only receive a copy of your credit report, not your credit score.3 This is good news because some people will have a low credit score simply due to a limited credit history. And while having some missed payments will show up on your credit report, employers may not interpret them as negatively as things like bankruptcy, foreclosure, or excessive debt.

Finally, you can control the message. If you have poor credit, prepare an explanation in advance for negative items on your report. Without trying to excuse your mistakes, you can cite factors outside of your control and offer sound reasons why your previous actions will have no effect on your future employment.

1. http://www.nerdwallet.com/blog/credit-card-basics/nyc-passes-ban-credit-checks-employment/

2. http://www.creditkarma.com/article/job-search-credit-report

3. http://www.creditcards.com/credit-card-news/six-myths-employer-credit-report-checks-1270.php

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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