Clarifacts

Credit Report

not hiring based on credit report

Can I choose not to hire an applicant based on his/her credit report?

It would be safe to say that most people have experienced at least some financial difficulties in their lifetime. So, an applicant with negative marks on their credit report should not automatically be disqualified for employment. In fact, employers should avoid making negative hiring decisions on information that is from years past or that is relatively minor.

The Fair Credit Reporting Act stipulates that if an employer decides not to hire an applicant based on the information in the report, they must first provide a notice to the applicant prior to taking the adverse action and also provide a separate notice after taking the action. The notice must provide the applicant with information on how to obtain a copy of the report. An employer that fails to comply with FCRA requirements could be liable for civil penalties.

Employers should always consult legal counsel regarding what data can be used in evaluating a candidate and should have policies and procedures in place to ensure that the use of credit information is both relevant and fair.

Learn more about the “two do’s” of using credit reports in the hiring process.

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