By Debbie A. Duran, eHow Contributor updated: March 26, 2011
. It is legal for employers to conduct credit checks on job applicants. The Society for Human Resource Management released a 2010 employer survey with indications that 13 percent conducted a credit check on all applicants and 47 percent conducted a credit check for only certain types of jobs. "The Washington Independent" reported that employers are conducting more credit checks on job applicants and the economic downturn has made it harder for people to get a job because of bad credit, and they can't fix their credit because they have no job.
When job candidates have their credit report screened, they see it as an invasion of privacy and a violation of rights. But it is not. Under the Federal Fair Credit Reporting Act (FCRA), employers are allowed to obtain and use an employee's credit report. However, there are certain guidelines for obtaining this information. An employer has to inform an applicant about checking into his background, and the applicant's signed permission is needed to validate the credit/background check.
Why Employers Conduct Credit Checks
The nature of the job is sometimes the reason a credit check is done. For example, financial institutions such as banking and mortgage companies are environments where embezzlement and fraud are easily committed. A good credit report is a good character indicator for an employer. In the federal government, all applicants undergo a standard comprehensive background check, regardless of position.
Employers also use credit checks simply to select one candidate over another, and there is nothing illegal about it.
Push to Ban Credit Checks
Credit checks for the purpose of employment have been a major disadvantage for the unemployed, according to "The Washington Independent." Several states and the federal legislature are looking at this trend and into passing bills addressing this issue. As of 2011, there are only four states that limit employers' pulling of employees' credit reports: Washington, Illinois, Hawaii and Oregon. There are 14 other states that are considering such bills: New Mexico, Vermont, Maryland, Colorado, New Jersey, Connecticut, New York, Pennsylvania, Indiana, Missouri, Nebraska, California, Texas and Kentucky.
An applicant has the right to refuse a credit check, but the employer has the right to refuse employment. After an employee has been hired, an employer can conduct subsequent credit checks. These post-employment credit checks can be used to facilitate promotions and transfers. If you had to sign the credit consent document when you started, the employer does not need your signature agai
PRC: Employment Background Checks: A Job Seekers Guide
Employee Issues: Employment Credit Check
"The Washington Independent": Are Employers Performing More Credit Checks on Job Applicants?
Read more: Are Credit Checks Legal for Employment Conditions?