Using Credit Reports and the Law

Credit checks can be a useful tool during the screening process of a potential employee. A poor credit report can signal some red flags. Performing a credit check, however, can bring certain moral or even legal scrutiny. It is best to know the rights and regulations of your state or local government.

Credit Checks

In hopes of preventing discrimination, many states and jurisdictions have passed laws regarding the use of credit checks in pre-employment screening. While a poor credit score can be a red flag, it should not be a complete deal-breaker. For example, if you are hiring a custodian or security guard for your company, a poor credit score has virtually no relevance to the position. Many laws limit what positions you can run the report for.

California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, Washington, and Washington D.C., as well as several cities, have passed laws limiting credit reports for employment screening. Under these laws, companies can only run a credit report for positions where it is relevant. For example, banks and financial institutions are allowed to obtain this information. It is also allowed for managerial positions, law enforcement and any position that handles personal information, confidential information, and security data.

Any potential impropriety for individuals in these positions can be devastating for your company. That is why running a credit report makes sense. For other positions, its relevance is minute and can lead to discrimination. A poor credit score may be indicative of a variety of different factors. While many of these scores are a result of their own behavior, sometimes it could be out of their control. You could potentially lose out on a quality employee because of this.

Learn More About Using Credit Reports

While conducting a credit report, compliance with the Fair Credit Reporting Act (FCRA) is a must. Before beginning the report, you must inform the candidate. Transparency in the process is key and will help you avoid any legal concerns. TruDiligence is fully transparent and handles the screening process in a thorough yet sensitive manner. Let us help you find the right candidate.