Determine When to Run a Credit Check for Employment Purposes
- If an employer conducts a third-party credit check on a job applicant, it must follow the procedures set forth in the Fair Credit Reporting Act (FCRA), including obtaining an applicant's written agreement before getting the report and providing the required notifications.
- Several states limit the use of credit checks by employers, so it is critical that an employer be aware of relevant state requirements before using credit checks as a hiring tool.
- Employers should use caution when conducting credit checks because they could be viewed as having a disparate impact on minority job applicants under civil rights law. Employers should therefore consider limiting the use of credit checks to situations where they have a legitimate business need to obtain the information, such as if the position involves handling financial data.