Credit Reports as Pitfalls for Employers and Landlords

Many employers and landlords suffer under the delusion that the Fair Credit Reporting Act applies only to consumer credit. Actually, it covers many types of consumer reports including criminal records, employment records, and driving records. From the familiar federal rule prohibiting employers from performing credit checks within employment applications to Byzantine municipal laws, any perceived misuse of such records can result in litigation. Many states are siding with consumers, enacting laws that limit the way credit reports can be used.

Credit Report Abuse

Certainly, there is potential for abuse of credit reports and other types of consumer history. However, employers and landlords must have properly vetted employees and tenants in order to run their businesses. To that end, be certain in your compliance with both federal and local laws. These limit the ways employers and landlords can use information obtained from credit reports.

State Laws

Some states have laws that require employers to limit credit inquiries to only those prospective employees who must handle cash. These employees have opportunities, and the temptation, to pilfer cash to help offset large credit card bills. Only banks and investment firms are exempt from these laws in all jurisdictions.

Some states, recognizing that unemployed status can result in discrimination, have forbidden job advertisements stating that unemployed persons need not apply. While the unemployed tend to have worse credit records, there is perceived bias in this area.

Many states and municipalities prohibit landlords from turning rental prospects away due to marital status, in part in order to protect those who have come out of divorce saddled with exorbitant debt. Requiring proof of income is allowed in all jurisdictions, but any whiff of discrimination based on marital status or credit reports opens landlords up to litigious action.

Learn More About Credit Reports

It can be difficult to stay abreast of these local laws, but reliably compliant background checks are necessary. Limit your exposure and be certain you have chosen the most professional of background checking companies to vet your prospective employees or tenants.