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There are many things employers cannot ask for
under equal employment opportunity laws, but your personal
credit history is not one of them. Many employers, including
some security companies, banks and municipalities request
applicants to sign a waiver authorizing them to do background
checks, which sometimes includes pulling a credit report either
to initially obtain a job or when applying for a promotion.
Employers do this for various reasons. They could be checking
to see if your debt load is too high for the salary they are
offering. For sensitive positions in security, banking or
government jobs, they may be trying to see how trustworthy
and reliable you may be. It is very important that your credit
report is accurate, not only for the purpose of obtaining
additional credit at good rates, but for your job security
as well.
The Federal Trade Commission (FTC) recommends
that you pull a credit history on yourself at least once every
year to ensure that you are receiving the 'credit' that you
deserve. Employers, or prospective employers have to give
you notice in writing that a credit report may be pulled.
They also need your consent before pulling your credit history
from a Credit Reporting Agency (CRA). Once you are hired,
your employer may continue to pull credit reports at various
intervals during employment as long as they have given you
a 'separate document notice' indicating that reports will
be pulled in the future.
However, they should not pull unnecessary reports,
as too many inquiries will negatively affect your credit rating.
Many financial advisors will tell their clients to periodically
pull their credit histories to check who has made inquiries
and why. In 1997, two important amendments were added to the
Fair Credit Reporting Act (FCRA). The first amendment ensures
that individuals are aware that consumer reports may be used
for employment purposes and agree to such use. The second
amendment ensures that individuals are notified promptly if
information in a consumer report may result in a negative
employment decision. If employers rely on a credit report
to take adverse action, that is denying a job application,
denying an employee a promotion or reassigning or terminating
employment, they must follow certain rules according to the
FCRA.
First, they must give you a pre-adverse action
disclosure that includes a copy of your credit report and
a copy of 'A summary of your rights under the FCRA.' After
the employer has taken the adverse action, they must give
you notice orally, in writing or electronically that the action
has been taken in an adverse action notice. This notice must
include: ·The name address, and phone number of the
CRA that supplied the report ·A statement that the
CRA that supplied the report did not make the decision to
take the adverse action and cannot give specific reasons for
it and ·A notice of the individual's right to dispute
the accuracy or completeness of any information the agency
furnished, and his or her right to an additional free report
from the agency upon request within 60 days.
Pam Spruk has worked in the banking credit and
collections industry most of her adult life. Working in the
industry, she knows how important having a good credit rating
can be. She also knows from experience that employers often
pull credit histories. "My last two employers have pulled
credit reports upon being hired," she said. "I understand
the importance of it, but sometimes things on your credit
report doesn't necessarily reflect the person that you are."
Mrs. Spruk had the unfortunate experience of
having her ex-husband's credit affect her negatively. Although
she has never been denied a job or promotion because of her
credit history, she says it is a little unsettling to have
his bad judgment reflect on her. In most states, once you
are married, your financial histories merge as well. It is
a good idea to know how your spouse's history has affected
your credit rating, especially before you apply for employment.
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