After the recession beginning in 2007-08 combined with the skyrocketing price of health care, more and more people find themselves with less-than-optimal credit scores. Of course, getting a promotion or a better job can help pay down those debts and improve credit. But with employers running background checks, employees may wonder: is their employer – or future employer – checking their credit too? Can employers see their credit score? Their foreclosure? Can they see if the employee defaulted on their credit card debt?

What Are Employment Credit Checks?

Employers do run background checks to verify that an employee is who they say they are, and to confirm certain information they included on your resume, like their education. Most have no need to know an employee’s personal financial history. The exceptions are in certain public service jobs – government, police – where you are given the public’s trust. For example, an excessive amount of unpaid or defaulted debt in an employee’s credit history could raise questions about their ability to manage public funds or could suggest that they may be vulnerable to bribery. Certain jobs in the financial industry may want to see an employee’s credit history – after all, if employees are managing others’ accounts, employers may want to know how employees manage theirs.

But employers cannot just check your credit report whenever they wish. Under the federal Fair Credit Reporting Act, employers may not pull their employee’s credit report without their consent. Employees must sign a consent form giving their current or prospective employer permission to check their credit. This form has to be a separate document from anything else they sign as part of a job application or onboarding package. The report the employer receives will include the employee’s accounts and their status, and any bankruptcies, foreclosures or short sales. However, the employer will not see an employee’s credit score or account numbers. Additionally, the employer’s inquiry will not affect the employee’s score.

Numerous states also further protect employees from the employers’ ability to access and use their credit information. These state laws vary in the specifics, but they typically limit the types of jobs for which employers can check credit. They also limit the types of jobs for which credit may be used in an employment decision. Some states require the employer to disclose to the employee in writing if they were denied employment (or continued employment, or a promotion, etc.) due to their credit report.

How To Know If You Can Check An Employee’s Credit

The best thing for an employer to do (assuming they do not know a local attorney to ask) is to search online for “[State Name] Fair Credit Reporting Act employer” which should bring up results including the relevant section of state law. California’s statute, for example, is Labor Code section 1024.5. Searching for “Labor Code section 1024.5” then brings up the full text of the law.  Unfortunately, no matter what state the employee lives or works in, their employer must get their consent to check their credit report.

If you feel that you need assistance for an employment law matter, please contact Hackler Flynn and Associates.

DISCLAIMER: Content within this post should not be considered legal advice and is for informational purposes only. Communications made through this post do not create an attorney-client relationship. Hackler Flynn & Associates is not responsible for any content that you may access from third-party resources that may be accessed through or linked to this post. Hackler Flynn & Associates is only licensed to practice in California.

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