What Role Does the Fair Credit Reporting Act Play in Employee Selection?
Established in 1970, the Fair Credit Reporting Act (FCRA) protects consumers' personal and financial information by placing restrictions on both credit reporting practices and credit inquiries. Any business or individual that intends to either pull credit reports or report accounts to the credit bureaus must follow the FCRA's guidelines. While the FCRA primarily impacts lenders, in certain cases employers are also affected.
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Credit Checks
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Not all employers require a credit check when you submit your job application. If your employer does request a credit check, however, the information in your credit history plays a role in whether or not the employer will ultimately select you to fill the position. Should the employer check your credit, it must follow the FCRA guidelines for employer credit inquiries. If an employer does not require applicants to undergo a credit check, the FCRA does not play a role in the employee selection process.
Rules for Employers
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The FCRA stipulates that a prospective employer must have the applicant's written permission before pulling a copy of his credit report. Job applicants who do not wish to grant a prospective employer permission to pull their credit history need not worry about accidentally signing their permission. The FCRA prohibits employers from including a credit check disclosure agreement in any other document. The form applicants sign consenting to a credit check must serve no other purpose.
An exception exists when a consumer applies for a job online or by mail. In these cases, employers can obtain the individual's permission for a credit check by phone or e-mail.
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Employee Selection
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The employer may use the information provided in your credit record to evaluate your reliability level, integrity and financial honesty. Should information in your credit report cause the employer to discount you for the position, the FCRA mandates that the employer must provide you with a copy of the report it used during the hiring process and written information regarding your right to dispute any information you deem incorrect within your report.
Legal Recourse
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Derogatory information on your credit report can make landing a job more difficult in certain industries, such as the banking industry. If you have a past bankruptcy in your credit record, however, prospective employers cannot take the bankruptcy into consideration when evaluating your credit. Doing so is against federal law. If an employer turns you down for a position on the basis that you filed for bankruptcy in the past, you have the right to file a lawsuit against the company.
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