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It’s “What’s Up? Wednesday”. Time to talk about CREDIT CHECKS . . .

By November 6, 2013July 23rd, 2018Human Resources

You asked: “We are already running the standard background checks on new hires, but we heard some employers run credit history checks. Should we be running those too?”

Alex answers: Credit checks are really only intended to be run for employees in credit-sensitive positions. While there is no federal law that prohibits running credit checks on employees, the Equal Employment Opportunity Commission (EEOC) largely frowns upon it because of the disparate impact it can have in the hiring of minorities and women. Additionally, a number of states have written laws to prohibit this type of credit check or severely restrict when/how employers use them. This is the case in California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington.

In Pennsylvania, employers are only able to run credit history checks on prospective employees if the reason for the check meets one of three criteria established in a 2012 amendment to the Pennsylvania Human Relations Act. Pennsylvania employers should only run credit checks if: (1) Such report is substantially related to the employee’s current or potential job. (2) Such report is required by law. (3) The position is with the Office of Attorney General, Pennsylvania State Police or other law enforcement agency. Keep in mind that it is the employer’s burden of proof to prove that a credit check is substantially related to the employee’s job… so don’t broadly run these checks on all applicants for all positions thinking that you have the right to this information for your own “peace of mind.”

In the case that there is no state law in place where the employer conducts its business, then it is up to the company to determine if the position is “credit-sensitive” and that employer must come up with his/her own list of disqualifying offenses based on credit history check findings. The common credit history check findings that many employers deem as appropriate disqualifying offenses (and the EEOC has not put forth an opinion on) include the following:

· More than two accounts of $300 or more that were 90 days past due.
· More than three collection accounts that were not medically related.
· More than two paid charge-offs in the previous 12 months.
· A car repossessed in the previous three years.
· A house foreclosure in the previous three years.
· A bankruptcy filing in the previous seven years.
· A judgment in the previous seven years.
· A default on student loans.
· Any unsatisfied liens.
· Any delinquency in paying child support.

If you would like more information about laws in your state, you can contact your state department of labor. As always, if you have further questions, please let us know by send your questions to If you’d like email notification of all blog updates, just click the follow button at the bottom of the window.
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