While most employers perform background checks on prospective employees, some also run credit checks. In fact, a survey by the National Association of Professional Background Screeners (NAPBS) discovered that 31% of employers ran credit checks on some applicants while 16% checked the credit of all of their applicants. So, what exactly is a credit check and are there any laws restricting credit checks? Keep reading to find out.
What is a Credit Check?
A credit check shows an applicant’s personal information such as their name, address, previous names and addresses, and Social Security number. It also reveals the debts they’ve incurred. These debts may be credit card debt, mortgage and auto loan debt, student loans and other loans. Payment history as well as late payments are disclosed as well.
If you are hiring employees to work in money-related positions in fields like banking or investing, you may want to run a credit check. By doing so, you can learn about their financial integrity.
Laws That Restrict Credit Checks
Under the Fair Credit Reporting Act (FCRA), there are some regulations you must meet when performing credit checks on prospective employees. These regulations include:
- You must inform employees you are going to conduct credit checks and get their written approval. If they do not approve, you can continue the interview process, but you may also reject their application.
- You can’t discriminate an employee if they have filed for bankruptcy.
- Your report cannot contain any negative information that is more than seven years old. Bankruptcies that are more than 10 years old are irrelevant as well.
- You are obligated to notify employees if their credit check is the reason you won’t be hiring them.
- You must share a copy of the report and give employees the chance to dispute any errors or inaccuracies.
Contact Chane Solutions
Here at Chane Solutions, we perform credit checks on employees. If you have further questions about the FCRA and how it affect these checks, contact Chane Solutions, a quality employment screening and drug testing provider today.