About half of employers perform credit checks on job prospects; and although the checks are permitted by law, there are limits to how they can be used. The Federal Trade Commission and the Equal Employment Opportunity Commission have issued two guides explaining how the Fair Credit Reporting Act and anti-discrimination laws restrict the practice of employee credit checks.
The checks require written permission from the employee or applicant, who have the right to review and resolve any negative finding before the employer acts on it. The law also prohibits use of credit checks in a discriminatory manner. Even so, a 2012 study by the Society for Human Resource Management found that one in 10 unemployed respondents were told they were not hired for a job based on the contents of their credit report.
Critics argue that poor credit is unrelated to a person’s ability to perform at work. “There’s no evidence anywhere that credit history has any bearing on anyone’s ability to do their jobs,” said Josh Zinner of the advocacy group New Economy Project. At least 10 states have passed legislation that restricts the use of job-related credit checks, and bills have been introduced in Congress to do so at the federal level. In December, Sen. Elizabeth Warren (D-Mass.) introduced the Equal Employment for All Act, which would allow credit checks only for positions that require national security clearance.