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Employers should generally approach the use of credit reports for employment purposes with great caution, carefully examining if such use is regulated by state law, is relevant to the job, and be on the lookout for potential future restrictions in 2014 as credit report checks continue to become a disfavored tool that could potentially disappear from the hiring landscape.  This is Trend Number Eight of the 7th Annual Employment Screening Resources® (ESR) ‘Top Ten Background Check Trends’ for 2014. For more information about the trends, please visit

Some states have placed significant limits on the use of consumer credit reports.  Currently ten states – California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington – have passed laws regulating the use of credit reports of job applicants and employees by employers. News reports have also questioned the use of credit reports for employment, even though an employment credit report does not contain a credit score. In addition, the U.S. Equal Employment Opportunity Commission (EEOC) has also shown interest in whether the overly broad use of credit reports by employers creates a discriminatory “disparate impact” against protected minority groups.

The idea that credit reports can be used in a discriminatory manner means employers will continue to face controversy with discrimination over using credit reports for employment screening. Employers must articulate a clear rationale as to why a credit report is related to a particular job and should also be aware of the potential for errors in credit reports. A debt may be reported incorrectly for various reasons or the applicant could be the victim of identity theft which can also lead to incorrect data. In addition, negative entries may well not be a valid predictor of job performance especially since many job applicants have faced a long period of unemployment that may lead to larger debts.

As a sign of the times, the Washington Times reports Senator Elizabeth Warren (D-MA) has proposed a federal ban on credit checks for job applicants by introducing legislation – ‘The Equal Employment for All Act’ – that would alter the Fair Credit Reporting Act (FCRA) by preventing companies from considering a job candidate’s financial history during the hiring process. The Act would only exempt the federal government or its contracting agencies from the prohibition of considering credit ratings of applicants when hiring for positions requiring national security clearance. The text of the bill is available at

Job applicants looking for work in a tough economy that undergo credit checks can get caught in a “Catch-22” situation where they have less than stellar credit histories because they cannot get a job but cannot get a job because they have bad credit histories. However, the use of credit checks by employers seems to be waning. A 2010 Society for Human Resource Management (SHRM) survey on the use of credit reports for employment screening revealed only 13 percent of employers surveyed conducted credit checks on all job candidates while 40 percent of employers did not conduct any credit checks on job candidates. Overall, the SHRM survey found 60 percent of employers ran a credit check on at least some applicants, mostly for jobs of financial or fiduciary responsibility such as handling cash, banking, and accounting. The survey is available at

Employment Screening Resources® (ESR) has co-authorized a white paper with LexisNexis titled ‘The Use of Credit Reports in Employment Background Screening’ describing the protections job applicants have regarding credit reports. The complimentary whitepaper, as well as other whitepapers on various subjects, is available for download at: The ‘Applicant Resources’ page on the ESR website also has more information about credit reports at For more information about states with laws regulating credit reports for employment, visit

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About Employment Screening Resources® (ESR):

LesRosenPhoto_Aug2012_SmallWhiteBorderFounded by safe hiring expert Attorney Les Rosen in the San Francisco, CA-area in 1997, Employment Screening Resources® (ESR) – ‘The Background Check Authority®’– provides accurate and actionable information that empowers employers to make informed hiring decisions for the benefit of their organizations, employees, and the public. CEO Rosen literally wrote the book on background checks with “The Safe Hiring Manual” and ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by a small percent of screening firms. Employers choosing ESR know they have selected an agency meeting the highest industry standards. To learn more about ESR, visit, call toll free 888.999.4474, or email [email protected].