Financial stress is front and center in most people’s minds these days. If you are in the workforce, you are one of the lucky ones. At least, for the duration of your shift, you are earning money instead of constantly dodging temptations and obligations to spend, and counting the minutes until your next paycheck reaches your account. Being poor is exhausting, much more exhausting than a long day at work. What is worse is that the less money you have, the more everything costs. When you live in a huge house, you can buy in bulk at Costco and keep most of the food in an icebox in the garage. When you live in a small apartment where your landlord keeps raising the rent, you cannot even afford a Costco membership, even if you could divide your bulk grocery haul among your neighbors, with the neighbors keeping their respective shares of the haul in their respective tiny fridges.
Debt and your struggles to keep up with the payments are the dominant themes of your life. To add insult to injury, your troubled financial history does not make it easier for you to get a job. The Fair Credit Reporting Act limits the information employers can legally find out about the credit history of job applicants and the adverse actions they can take against employees and job candidates based on their credit history. The Bozeman Fair Credit Reporting Act lawyers can answer your questions about employment law as it relates to workers’ debt problems outside of work.
What is a Credit Report, and What Does it Have to Do With Employment Law?
The Fair Credit Reporting Act is a federal law that went into effect in 1970, which means that only the oldest people alive today made financial transactions before this law was on the books. In the old days, lenders made their decisions to lend based on their subjective judgments about the creditworthiness of the prospective borrower. In a small town where everyone knew everyone, they could simply ask their colleagues and neighbors, who could offer their assessment of the borrower.
Of course, everyone who has ever lived in a close-knit community knows that the community’s judgments of individuals are not always fair. You could find yourself unable to borrow from anyone just because you had unintentionally gotten on someone’s bad side years earlier. And that is only when the prospective loans were between people with a personal history together. If you were an outsider, people could refuse to lend to you based on your skin color, your religion, where you were from, and all sorts of other characteristics that have nothing to do with your personal history of borrowing money and repaying it.
Pursuant to the Fair Credit Reporting Act, the credit reporting bureaus Equifax, Experian, and TransUnion compile records on the borrowing and repayment history of individual consumers. Your credit report does not record every financial transaction you make, only those related to borrowing money and fulfilling financial obligations. The credit reporting bureaus assign each consumer a credit score based on several factors. Your credit score gets higher when you take out loans and pay them down, but it gets lower when you miss payments or otherwise get into financial trouble.
The Poor Get Poorer?
Credit reports do not show all your financial activities, only the ones that the credit reporting bureaus consider the most important to creditors who are deciding whether to lend to a loan applicant. Therefore, they show your credit card balance and the payments you have made toward it, as well as one-time loans such as personal loans, car loans, and home mortgages. The bad news is that they do not show your ordinary bills that do not involve borrowing, such as rent payments and utilities. The worst news is that credit reports show these non-credit-related bills only when you miss a payment. This means that the people who are fortunate enough to qualify for credit cards, based on their income, rack up gold stars every time they pay at least the minimum payment on their balance. Meanwhile, the rest of us who toil every pay period to keep up with their bills have nothing to show for it; creditors refuse to lend to them based on their lack of credit history.
The worst news of all is that prospective employers can see your credit history during pre-employment background checks. They can see if you have missed payments on your bills and if you have filed for bankruptcy in the past several years. In theory, they can refuse to hire you simply because of your history of financial struggles, when all you really need is employment income to keep you from repeating the financial problems that show up as negative marks on your credit report.
Your Rights Regarding Pre-Employment Credit Report Checks
Imagine what a dystopia it would be if you aced your job interviews, only for employers to reject you without explanation after a pre-employment credit check. Fortunately, federal and state employment laws require employers to notify you when they plan to do a credit check and to get your written consent before they proceed with the check. Your employer will give you a form that tells you what kinds of information about your financial history the employer will be able to see, and they will only do the credit check after you sign. If the employer makes a negative decision about hiring you based on the information it found on your credit check, it must provide a written notice explaining how the information on your credit report led it to this negative decision. If this happens, you have the right to appeal the decision. If it was due to errors on your credit report, the credit reporting bureaus must correct those errors if you request a correction.
Contact HKM Employment Attorneys About the Fair Credit Reporting Act
The Bozeman employment lawyers at HKM Employment Attorneys, LLP, can counsel you about how your credit history affects your employment situation. Contact the employment lawyers at HKM Employment Attorneys LLP in Bozeman, Montana, to set up a consultation.
