Checking Credit Reports

If an applicant is going to be handling large sums of money or exercising financial discretion at your business, you may want to run a credit check. Unless you're worried about the applicant stealing money or expensive equipment, a credit check probably won't be necessary. There are a lot of federal restrictions on credit reports, so doing them can be more trouble than it's worth.

What's in a credit report? A credit report will include the following information about the applicant:

• address
• Social Security number
• bankruptcies
• tax liens
• judgments
• child support obligations
• loans
• the names of other employers who have checked the applicant's credit

What's not in a credit report? Credit reports do not provide information on:

• previous income
• college background
• bank accounts
• personal investments
• criminal history
• medical history

Factors to consider. There are a number of things to consider if you decide to run a credit check.

• It will cost you: You will have to pay the credit agency for the credit report. The fee may vary.
• Federal law on credit reports: There is federal legislation that governs the use and disclosure of credit information. You must follow the law if you're going to run a credit check.
• State laws on credit checks: A number of states currently have laws on the books that require employers to provide notice and/or copies of credit checks whenever they're used for employment-related decisions.
• Antidiscrimination laws also apply: You can also get in trouble with antidiscrimination laws if you can't show a business reason for the credit check if screening on that basis has a disproportionate impact on minorities.