When (and How) to Use Credit Reports Responsibly

Credit checks are a common part of employment screening, especially for positions involving financial responsibilities. But with growing concerns over privacy and fairness, more states are imposing restrictions on their use. Here’s what you need to know as an employer.

Why Check Credit?

Financial Responsibility: Credit reports can indicate how a candidate manages financial obligations, important for roles handling money or sensitive data.
Fraud Prevention: Patterns of financial distress could signal potential risk for fraud or embezzlement.

Legal Restrictions Are Growing

State and City Laws: States like California, Illinois, and Colorado, as well as cities like New York City, have passed laws restricting the use of credit checks for employment. Most require that credit information is only considered for specific job categories.
Notification Requirements: Under the Fair Credit Reporting Act (FCRA), employers must get written consent before running a credit check and must notify candidates if negative information affects a hiring decision.

Best Practices for Using Credit Checks

Use Only When Relevant: Only request credit reports for positions where financial responsibility is a core job requirement.
Stay Transparent: Explain to candidates why a credit check is required and how the information will be used.
Follow Adverse Action Procedures: If you decide not to hire based on credit information, provide the required notices and an opportunity for the candidate to respond.

Credit checks can be valuable, but only when used fairly and legally. Keep up with changing laws, use them only when relevant, and always be transparent with candidates.

Need Help with Background Checks or Compliance?

Whether you’re hiring new talent or updating your screening processes, the Swailes Background Check team is here to help. From criminal background checks and FCRA compliance to drug testing, employment and education verifications, MVR reports, credit history reviews, and Social Security number validation, we provide fast enrollment and expert support every step of the way.

Contact us today to streamline your screening process with confidence.