Credit Checks

Many employers and 1099 contracting companies conduct criminal background checks in their recruitment and hiring process.

overview

Running a personal credit check on an employee before extending a job offer is an additional hiring practice for many types of businesses. If you are a Job seeker, you should prepare for this possibility and understand what an employment credit check entails.

An employment credit check presents an overview of your financial behavior, showing accounts, dates of account opening, credit limits, and loan totals but excludes your credit score, date of birth, marital status, and account numbers.
You have legal rights under the Fair Credit Reporting Act (FCRA) about employment credit checks, including the right to see the report run by your potential employer for free, dispute any incorrect findings, and reject the credit check in its entirety.

Why do employers run
credit checks on employees?

Employers run credit checks on potential employees or 1099 contractors to help make better hiring decisions. In most cases, nearly all the information included in the credit check relates to personal credit and debt. Some employers believe understanding how an individual handles their own money provides insight into how the candidate will perform on the job. Some companies run credit checks before extending job offers for any position, while others only perform credit checks for candidates or 1099 contractors who will handle money for the organization, like accountants or bookkeepers, before making a job offer.

What do employers see
when checking your credit?

Credit checks differ from background checks in terms of the content. Credit checks also differ from the personal credit report you receive when you check your credit history. The credit check report employers view usually includes information like:

Types of Accounts
You Have

The Dates You Opened
Your Accounts

Credit Limits

Loan Totals

Account Balances

Payment History

Employers will not see information like your credit score, your date of birth, your marital status or account numbers. Employment credit checks are instead an overview of how you handle debt.

What are my rights regarding
employment credit checks?

The Fair Credit Reporting Act, or FCRA, dictates what credit reporting agencies can and cannot share in a credit check report, and what employers must or cannot do in the course of seeking your credit check report:

Obtain written approval

The hiring company must obtain your written permission and approval to run a credit report on you. They can't perform the credit check without it.

Include old information

Credit checks have limitations on how far back into your financial history they can go. Typically, the limits are seven to 10 years, depending on the type of account or loan.

Provide cause

Should an employer choose not to hire you based on the credit check, they must disclose this reasoning to you.

Review the report

You have a legal right to view, for free, the credit check report obtained by your potential employer. If you'd like to see it, ask what reporting agency the hiring company is using to provide the credit check report and make your request for the report.

Dispute the findings

You can dispute the findings on the credit check report if they're incorrect.

Are there state regulations
for credit checks?

Many states have their specific regulations for employment/1099 contractor credit checks with stricter guidelines than the federal rules. These states, in particular, limit the use of employment credit checks:

California

Colorado

Connecticut

Hawaii

Illinois

Maryland

Nevada

Oregon

Vermont

Washington

D-Columbia

If you live in one of these states, it's best to check the specific laws and regulations guiding employment credit check practice to ensure the hiring company is within its rights if and when it requests a credit check. Some cities, for example, New York City, also have credit check regulations for businesses.