Employer Credit Check Laws: The Latest News

SEP 23, 2011

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We have talked before about how more employers than ever are checking job applicants credit as part of the hiring process. And we’ve also discussed the importance of maintaining good credit while you’re looking for work.

Employer credit checks are becoming more common, but not everyone is in agreement on whether or not they’re fair to applicants and really useful for employers. Employer credit check laws vary from state to state, but right now the only federal law that really governs them is the Fair Credit Reporting Act (FCRA).

Under that law, a potential employer can check your credit only after getting your written consent to do so. If the employer decides not to hire you based on the results of that credit check, he has to provide you with a copy of the report and inform you of your right to challenge the report.

Some legislators and consumer advocacy groups are pushing for stricter employer credit check laws in a number of states. Here’s a rundown of some of the latest headlines on the subject:

  • On Oct. 1, 2011, a new law will take effect in Connecticut prohibiting employers from requiring applicants to submit to a credit check unless they’re applying for a job at a financial institution, the check is otherwise required by law, or credit history is substantially related to the job. The law would also protect current employees unless their credit is directly related to their job or the employer has reason to believe the employee has broken the law.
  • TBO.com (Tampa Bay Online) reported that a bill is pending in Florida that would prohibit employers from checking the credit of job applicants unless a credit check is otherwise required by law or the employer can show that the applicants credit history is directly pertinent to the job. And even in cases when a credit check would be OK, the law would bar the employer from basing a hiring decision solely on credit.
  • The Ventura County (Calif.) Star reported that a bill pending in the California Assembly would bar applicant credit checks unless the person is applying for a job in an industry that requires the check by law (banking or financial services), or if the applicant is seeking a managerial position.

While states may continue to consider and in some cases adopt laws restricting employer credit checks, it is still up to you to protect your credit during unemployment and the job-hunting process. Preserving your good credit report and score is the best way to ensure you never miss a job opportunity because of bad credit.