Is it legal for your employer – or prospective employer, if you are job hunting – to check your credit report and use it in making employment decisions? This question has become more urgent in the last five years, as the economic slowdown and housing market crash have led many people to miss payments, load up their credit cards, walk away from their heavily mortgaged homes, and even declare bankruptcy.
Federal law (the Fair Credit Reporting Act, or FCRA) requires
employers to follow certain procedures if they want to pull an employee or
applicant’s credit report. As long as an employer follows those notice and
authorization procedures, the employer is free to decide not to hire an
applicant, or to discipline or even fire an employee, based on the contents of
his or her credit report. (You can find out more about the FCRA’s requirements
in our article Can
Prospective Employers Check Your Credit Report?)
Since the economy declined, however, some states have stepped in to pass laws restricting or prohibiting an employer from considering credit history in making job decisions. These states have determined that it’s neither fair nor sensible to punish people for past credit mistakes, especially if the penalty affects their ability to earn money – and stay out of financial trouble – in the future.
Currently, only the states listed below limit an employer’s ability to gather or use credit history in making employment decisions. To find out what your state requires, select it from the list.