Some States May Ban Employee Credit Checks

New state laws could end a cycle that has kept many workers out of the workforce. Job searchers may have an easier time getting a job if their state passes a law limiting or even banning employment credit checks.

Hawaii and Washington already have laws in place that keep employers from using credit checks on some employees and prospective employees. 17 other states have proposed laws to do the same.

What's wrong with employee credit checks?

One of the problems with employment credit checks is that they could be discriminatory. Some employers contend that there's a connection between credit history and job performance, but that may not be true in all cases.

Employment credit checks also perpetuate financial problems that could be solved with employment. Unemployed consumers can easily fall behind on payments while they're in between jobs. Getting hired would solve the problem, while being denied for employment because of those missed payments would only worsen the situation. It's the latter situation that lawmakers want to eliminate.

If at first you don't succeed...

This isn't the first time employment credit checks have been up for discussion among lawmakers. Last year, Steve Cohen, a Democratic representative from Tennessee, introduced the Equal Employment for All Act. The law would have prevented employment credit checks with a few exceptions. The bill has been sitting in Committee since July 2009.

Current rules for employee credit checks

The Fair Credit Reporting Act requires employers to follow certain rules when they use a credit report for employment purposes. The employer must have your written consent to check your credit, even if you're already an employee. Employers must also provide you with a pre-adverse action notice that includes your credit report and lets you know that your credit information could result in a negative action taken against you. 

If the employer takes adverse action, like turning down your job application, based on information in your credit report, you must receive notification of the action. You should also receive information about the credit bureau that provided the report. You have 60 days to request a free copy of the report used in the employment decision. You also have the right to dispute any inaccurate information in your credit report. (You have this right regardless of an employment decision.)

To improve your chances of getting hired, check your credit report before you apply for a job and make sure the information in it is accurate. Dispute any credit report errors with the credit bureaus.

Your role in getting state laws approved

Write to your state senator and representative if you want your state to enact laws to prevent employment credit checks. You can write in support of a law that’s already been proposed. Or, if your state has not already proposed a law, you can urge your lawmakers to draft one.

States that have proposed a law to limit or ban employee credit checks:

• California
• Connecticut
• Georgia
• Illinois
• Indiana
• Maryland
• Missouri
• Montana
• New Jersey
• New York
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• Vermont
• Wisconsin