For the vast majority of American adults, employment, independent contractor gigs, or a combination thereof is their main source of income, and yet the money they earn is barely enough to cover necessities. Most households have unpaid medical debt, even when one family member’s employer-provided health insurance policy covers the whole family. Many families with a household income above $100,000 live paycheck to paycheck. Therefore, being successful at your job is often not enough to qualify for credit that would enable you to achieve long-term financial stability, such as a home mortgage or a car loan. Your credit report follows you around like an evil twin of your stellar job performance. You might think that this only bothers you if you need to buy things on credit; you can stop your credit report from ruining your day simply by spending your free time clipping coupons and by patiently negotiating with doctors’ offices and hospitals to let you make low monthly payments on your medical bills.
Unfortunately, when you apply for jobs that pay better than the one you have now, prospective employers have the right to access your report, but the law protects you from prospective employers unfairly using the information in your credit report against you. The Philadelphia Fair Credit Reporting Act lawyers at HKM Employment Attorneys LLP can answer your questions about how your credit history can affect your future employment and how to stop previous financial hardships from sabotaging your efforts at finding a new job.
What is Fair in Credit Reporting?
The Fair Credit Reporting Act (FCRA) is a federal law enacted in 1970 to standardize credit reporting practices and prevent consumers from unfair disclosure of their financial history and from unfair decisions by creditors. Before the FCRA was into effect, creditors would compile data about consumers’ personal characteristics, health history, and other non-financial matters; these statements on consumers’ credit reports ranged from subjective to downright defamatory. The FCRA sets limits not only on what kind of information creditors can report about consumers but to whom they can reveal this information and for what purpose. In this regard, it is one of the oldest data privacy laws on the books in the United States.
Pursuant to the FCRA, these are the circumstances in which it is legal to access someone’s credit report:
- A consumer may access their own credit report once per year free of charge and may request it additional times, but the credit reporting agencies may charge a fee for the subsequent credit reports.
- When a consumer applies for a loan or similar financial product, the lender may examine the consumer’s credit report and use the information in the report as a basis for decisions about lending.
- A prospective employee may access a job applicant’s credit report and use it as a basis for hiring decisions.
The FCRA gives consumers the right to dispute inaccurate information on their credit reports and sets procedures for investigating claims of inaccuracy. To find out more about your rights and the rights of your current or prospective employer regarding your credit report, contact a Philadelphia employment lawyer.
What Is a Credit Report?
A credit report is a written statement that shows a consumer’s history of borrowing money and repaying it. Therefore, your credit report shows the following types of debts that you owe and your history of making payments on them:
- Credit card accounts
- Most medical bills
- Car loans
- Home mortgage loans
- Personal loans
In other words, it does not show all of the things you make payments on. Perhaps you have lived in the same rented apartment for years, and always paid your rent and utility bills on time, but your credit report does not show this. It also does not show buy now pay later (BNPL) payment plans. Therefore, the people with the best-looking credit reports are the ones who have always been in a position to qualify for sizable loans like home mortgages. There are plenty of people out there who are meticulous about their finances, but their credit reports have little to say about the matter.
Your credit report forms the basis of your credit score, which is a numerical value attributed to your credit history. The major credit reporting agencies are Equifax, Experian, and TransUnion.
Who Can See Your Credit Report and Why?
The FCRA grants consumers a substantial amount of privacy regarding their credit reports. For example, someone who matches with you on a dating site and wants to find out if you are telling the truth about your financial situation does not have the right to view your credit report. Your former classmates who saw your profile on Facebook and are disappointed that you are still as pretty as you were in high school cannot go to your credit report to get their fix of Schadenfreude, either. In general, the only people who can access credit reports are consumers accessing their own credit reports, lenders examining loan applicants’ credit history, and prospective employers conducting pre-employment background checks.
How Does Credit Reporting Apply to Employment and Job Searches?
Employers have the right to conduct credit checks on job applicants and to let the applicants’ credit history influence hiring decisions. If an employer plans to request an applicant’s credit report, they must notify the applicant in writing and obtain the applicant’s written consent. If the employer plans to make a negative decision about the applicant based on information in the credit report, the employer must also notify the applicant of this, as well as notifying the applicant of how to dispute the decision or the credit report information on which it was based.
Contact HKM Employment Attorneys, LLP About Credit History and Employment
The Philadelphia employment lawyers at HKM Employment Attorneys, LLP can help you if you have a troubled financial history and a prospective employer has used this fact against you in a job search. Contact the employment lawyers at HKM Employment Attorneys LLP in Philadelphia, Pennsylvania, to set up a consultation.