By Katie Kulp


When searching for a new employee, it’s natural to seek as much information as possible before making a decision. Before you decide how far to take your search, however, you need to answer one question: How much is too much? With good reason, the laws surrounding background checks are designed to protect the privacy of those being investigated, and limiting your search to necessary records meets that goal while also protecting your company from potential compliance breaches. So, should you check a candidate’s credit report before hiring them? Before you do so, consider these points.

When should you check a candidate’s credit report?

Though checking credit reports is not prohibited across the board, the Fair Credit Reporting Act (FCRA), EEOC Guidance and other state/local laws keep tight control over how and when such files can be accessed or used against someone. Privacy and consumer fairness have become primary focuses of the legislature these days, so employers must consider these important factors, among others, have before performing credit reports:

·         Permission

If a candidate has given permission for a background check, this does not mean your company automatically has the right to collect a credit report. Rather, permission for credit checks should be specifically spelled out in a disclosure, making it abundantly clear that one will be performed and explain how the results may be used. Keep in mind, certain states, such as CA, require a completely separate form with specific language for consent.

·         Transparency

Candidates have a right to view any records you collect during the screening process, including their credit report. Many will likely take advantage of this opportunity to view their current credit report without having to access their records unnecessarily.

·         The right to dispute results

Since there is always a small chance of finding inaccuracies in a candidate’s credit history, all applicants have the right to see and dispute their results before a hiring decision is made. Take special care to go over any negative results with the candidate before rejecting them, in addition to the appropriate adverse action process, as the FCRA, EEOC and consumer fairness ordinances demand that all employees and candidates be given a chance to defend themselves before any adverse actions are taken.

  • EEOC Guidance and State/Local Law Bans

The EEOC issued guidance back in 2012 urging credit reports not to be used against minority classes, also revealing the statistical proof of unfairness of using credit reports against certain groups. Disparately impacted Individuals who are turned away based on a credit report can and will file claims against employers if this information is used against them. Additionally, certain states and localities outright ban the use of credit reports in hiring decisions. This means employers should not frivolously perform credit reports on just anyone. Credit reports should only be ordered when allowed by state/local law and when related to the job. Legal Counsel should always be consulted to decide when it makes sense to run these reports and/or how to legally and ethically utilize the results.


Though it’s rarely necessary to conduct credit reports on potential hires, you should carefully consider your screening needs before conducting any during the new-hire process. At Chane Solutions, we provide cost-effective and customizable background screening services for businesses in every industry. To start crafting a screening program that meets your demands, contact us today.

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