Everyone is worried about money these days, but if you have a full-time job, then some would argue that you have fewer worries than most. Of course, having a job is not a solution to all your financial problems, given that the cost of living has gotten so high that everyone except people with generational wealth lives paycheck to paycheck. If you have ever struggled financially, you know that not having money makes it harder to do everything from borrowing money to opening a bank account to getting a job. The Fair Credit Reporting Act offers protections to job seekers that limit the opportunities of prospective employers to hold job applicants’ previous financial hardships against them. The Houston Fair Credit Reporting Act lawyers at HKM Employment Attorneys LLP can help you understand and exercise your rights in relation to your credit report and the information it contains.
What is a Credit Report?
A credit report is a record of a consumer’s transactions that involve incurring financial obligations that must be repaid in installments and the extent to which the consumer met those obligations. These are some items that might appear on your credit report:
- Credit cards
- Personal loans, including bank loans and payday loans
- Home mortgages
- Car loans
- Medical bills
- Bankruptcy filings
The credit reporting agencies (Equifax, Experian, and TransUnion) include records of when the consumer applied for loans and other financial products and whether or not the lender approved the application. A common criticism of credit reporting is that your credit report shows all the payments you missed while not showing all the payments you made on time. For example, rent payments, utility bills, and buy now pay later (BNPL) installment payments tend not to appear on credit reports.
Credit reports are the basis of a consumer’s credit score, which is calculated by giving certain weights to behaviors such as applying for new loans, keeping existing credit card accounts open, and paying bills on time. Lenders use consumers’ credit scores to determine whether to lend money to the consumer and to determine the interest rate. In other words, the credit reporting bureaus give you positive points for making payments on your mortgage, but only if your credit score is already high enough that you could qualify for a mortgage. Someone who pays the same amount toward rent as you pay toward a mortgage does not get that credit score boost. Thus, the current credit reporting system helps the rich get richer to the exclusion of everyone else.
How Do Credit Reports Relate to Employment?
It stands to reason that if you want to improve your financial situation, the first step is to apply for jobs. The bad news is that employers can request your credit report as part of a pre-employment background check. The items on a credit report do not tell prospective employers very much about how well you will perform your job duties; they simply show whether you have previously experienced financial hardships.
Employers have the right to request a copy of a job candidate’s credit report from one or more of the credit reporting agencies during the job application process. If an employer requests a copy of a job applicant’s credit report, the employer must abide by the following obligations:
- The employer must notify the applicant before requesting a copy of the applicant’s credit report. The applicant must consent to the employer requesting the credit report before the employer can submit the request to the credit reporting bureaus.
- Before obtaining the applicant’s consent to request the credit report from the credit reporting agencies, the employer must explain in detail to the applicant the purposes for which it is requesting the credit report and the ways in which the information in the credit report may influence the employer’s decisions.
- After obtaining the credit report, the employer must use it only for the purposes that it disclosed to the applicant. The employer must not share any of the information in the credit report with any third parties.
- If, after reviewing the credit report, the employer decides not to hire the applicant, the employer must provide a copy of the credit report to the applicant. If the applicant asks, the employer must explain how the information in the credit report influenced the employer’s decision not to hire the applicant.
- The employer must provide a reasonable deadline by which the applicant, if they so wish, may dispute information in the credit report that influenced the employer’s decision not to hire the applicant.
Your Rights Under the Fair Credit Reporting Act
The Fair Credit Reporting Act is a federal law, and one of its provisions is that states may not pass their own laws that contradict it. Therefore, Texas laws that relate to credit reporting agree with the federal Fair Credit Reporting Act and formalize the same rights and obligations. Whether your credit reporting is being used as part of a pre-employment background check or for any other purpose, you have a right to an accurate credit report. If you detect inaccurate information on the credit report, you have the right to dispute it, and the credit report agency must verify or remove it in a timely manner. Negative information on a credit report can only remain visible for a certain period of time (for example, seven years for a bankruptcy filing), and then the credit reporting agency must remove it. Consumers who suffer financial losses, including loss of employment or losing out on an employment opportunity, because of an inaccurate item on their credit reports have the right to sue the creditor or credit reporting agency that is the source of the inaccurate information for damages.
Contact HKM Employment Attorneys, LLP About Pre-Employment Credit Checks
The Houston employment lawyers at HKM Employment Attorneys, LLP can help you resolve disputes related to pre-employment background checks. Contact the employment lawyers at HKM Employment Attorneys LLP in Houston, Texas, to set up a consultation.