The Fair Credit Reporting Act (FCRA) authorizes employers to request a person’s credit history if they have a legitimate business need for the information. Generally, employers are allowed access to this information for purposes of deciding whether to hire, promote or terminate an employee.

An employer has to take specific steps before obtaining a credit check. In addition, there are certain things an employer has to do if your credit history is a factor in their employment decision.

What do Employers Need to do to Run a Credit Check?

Under the Fair FCRA, an employer must first notify you in writing and get your permission before obtaining your credit report. To give an employer permission to run a credit report, a separate document must be created and signed. For example, an employer cannot insert a section into a job application or employment contract asking you to grant them permission to run a credit check.

You do have the right to refuse to give an employer permission to run a credit report. However, your refusal may raise suspicion and give the employer reason to refuse to hire you, promote you or retain you as an employee.

What Happens if your Credit History Negatively Affects your Potential or Current Job?

If your credit report is a reason that a potential employer refuses to hire you, the FCRA requires that the employer provide you with the following:

  • A copy of the report;
  • Information regarding your right to dispute the report; and
  • Contact information for the credit bureau that issued the report.

If your credit report shows that you filed for bankruptcy, it is against federal law for an employer to terminate you because on the bankruptcy filing. In addition, a potential or current employer cannot use information they obtain from your credit report to discriminate against you. This would include discrimination based on race, national origin, sex, religion, disability, genetic information and/or age.

When Should I Consult an Attorney?

Under the FCRA, an employer has the right to use information obtained in your credit report to make employment decisions. However, if you believe that you have been refused a position or wrongfully terminated for illegal reasons, such as discrimination or because you filed for bankruptcy, you should consult an employment lawyer. An attorney can help you understand your rights and file a complaint against the employer if necessary.

Additionally, many states have their own laws regarding credit checks run by employers. State laws may prohibit or restrict employer credit checks. An attorney can inform you of any applicable state laws in your jurisdiction.