ABA Family Legal Guide

Law and the Workplace

The Hiring Process

May an employer run a credit check on an applicant?

Yes. They are very helpful when the information is necessary for a job-related purpose. This might include anyone who handles credit cards, or has access to merchandise, which is most of the retail service industry. It also encompasses a number of individuals in the wholesale sector, such as warehouse workers, shippers, and so on.

However, it's wise not to use credit checks indiscriminately. Court cases under Title VII have held that requiring people to have good credit before they can be hired can have a discriminatory result, since nonwhites are more likely than whites to live below the poverty level. Even if a credit check is necessary for the job in question, the Fair Credit Reporting Act (a federal law discussed in chapter 7, "Consumer Credit") requires employers to notify applicants if they intend to obtain credit information from a consumer reporting agency and to get written authorization from the applicant. If an employer decides not to hire applicants based in whole or in part on a credit report, the employer must inform the applicant, provide a copy of the report, and tell the applicant about his or her rights under the Fair Credit Reporting Act.