Can Prospective Employers Check My Credit Report?

If a prospective employer wants to check an applicant's credit report, it has to follow the rules set out in the federal Fair Credit Reporting Act (FCRA), including getting the applicant's written consent ahead of time. But some states have decided the FCRA doesn't go far enough: To protect the many applicants whose credit has suffered in the recent economic downturn, a handful of states have passed laws restricting whether or how employers may use credit reports. And many more are considering similar laws now. 

What the FCRA Requires

Before an employer can pull an applicant's credit report, it must notify the applicant of its plans and get the applicant's written consent. This notice and consent must be set out on a separate form; it can't be part of a job application or other employment document. An employer can't force you to consent, but it can refuse to consider you for the job if you won't allow it to check your credit. 

If the employer decides not to hire you based on something in the report, it must send you a notice called a "Pre-Adverse Action Disclosure." Essentially, this notice informs you that the employer plans not to hire you because of the report. The employer must also send you a copy of the report and a copy of a notice explaining how you can contest incorrect information in your credit report, among other things. 

Finally, once the employer actually doesn't hire you based on the report, it must send another notice, called an "Adverse Action Notice." This document states that you won't be hired and provides some additional information on your rights. 

Learn more about the Hiring Process.

Some States Offer More Protections

In response to the recent financial crisis, which has damaged many people's credit scores and credit reports, some states have passed laws that put limits on whether or how an employer may use applicant credit reports. These laws generally prohibit employers from pulling credit reports or using them to make hiring and other job decisions, in most circumstances. There may be exceptions for certain industries and jobs. 

To date, more than half a dozen states have passed these laws, and many more are considering them. To find out your state's rules, go to the website of the National Conference of State Legislatures and check its chart on the topic; here is the 2011 chart, which is updated regularly.

Learn more about Discrimination in the Workplace.

Other Steps You Can Take

If your state allows employers to check credit reports, and you know yours is less than stellar, you should come up with a plan. First off, try to correct or remove inaccurate, incomplete, or outdated negative items on the report. (For details on how to do this, check out Nolo's Credit Repair.) If there are negative items you can't remove or dispute, think about how you can explain them to a prospective employer, if that becomes necessary. Not all jobs require financial management skills, so a poor mark on your credit report may be completely irrelevant to the job. Or, perhaps your credit suffered due to a one-time crisis that has now passed. Although some employers won't look past an iffy report, others are willing to be more reasonable about what the report says about you as a potential employee -- and the better you can make yourself look, the more likely you are to get the job.