This article will help you:
- Decide whether to include credit reports in your background screenings
- Set up credit reports for the first time
- Make sure that your credit reports are compliant and job-relevant
Consumer Reporting Agencies (CRA) like Checkr provide employment credit reports, which differ from credit checks for other purposes such as an annual credit report, obtaining loans, or assessing credit scores. The differences are:
- Employment credit reports do not contain a scoring system, such as a FICO score
- Employment credit reports do not display individual account numbers of loans or revolving credit cards
- An employment credit report will not affect a person's credit score (neither a hard nor soft hit), as it is not seen as an inquiry by a financial institution to establish an account
Credentialing for Employment Credit Reports
Before Checkr clients can order employment credit reports, they must go through an onsite inspection performed by a third party. As part of this process:
- The third party will inspect the offices of the customer where credit reports will be ordered and reviewed.
- The customer must state their intended business purpose for conducting credit reports.
To comply with the Fair Credit Reporting Act and similar state laws, an employment credit report must have job-relevance: the role should have fiduciary responsibility. An easy way to test whether a credit report is compliant is to ask, “Will this person handle or manage customer/company funds?” If not, a credit report should not be ordered.
When assessing a background report, treat the results of a credit report with extreme care. The Equal Employment Opportunity Commission (EEOC) requires employers not to automatically take adverse action on credit reports. This requirement stems from research showing that automatic denial of candidates based on credit reports and criminal records has a disparate impact: in other words, it disproportionately affects protected groups by denying them employment.
Several states have specific permissible reasons that employers must choose when ordering credit reports. See our article on state-specific permissibility for partial list of those states, but you should consult with your legal counsel to determine whether credit checks are permissible based on the job role and state.