Hiring the wrong candidate can expose you to financial risk, compliance issues, and damage to your reputation. Those are just a few reasons why more than 90% of employers say they conduct employment background screening before making a hiring decision.
For certain roles, reviewing an applicant’s financial history can provide insight into reliability, responsibility, and potential risk. For example, a position that includes financial oversight or access to the company’s accounts might benefit from a pre-employment credit check.
Before you order one up, however, you need to know how a credit check for employment works, how to use the information you get, and how to comply with federal regulation.
What Is a Credit Check for Employment?
A credit check for employment is a type of background screening used during hiring. The report provides information about an applicant’s financial history and credit behavior. It typically includes a summary of financial accounts and payment patterns that show a history of how applicants have handled their finances.
Employers generally review these reports as one piece of a broader screening process to evaluate risk. It makes sense. Say you’re hiring a business manager or controller; you might want to make sure they don’t have a history of serious financial trouble.
When Employers Conduct Pre-Employment Credit Checks
Not every job requires financial screening, and this is key. Many states have laws restricting credit checks during hiring, without specific permissible reasons. However, some roles commonly include a pre-employment credit check as part of the hiring process.
This might include roles in finance, accounting, payroll, or financial management. Positions that involve handling cash, approving payments, or managing company budgets may also require additional screening. Senior leadership positions sometimes include credit checks as well, particularly when executives have access to financial systems or confidential company information.
What Appears on a Pre-Employment Credit Check
A credit check for employment includes financial history drawn from credit reports, such as:
- Credit account history: Shows open and closed credit accounts and payment history so employers can see patterns of financial responsibility.
- Debt and collection records: Identifies accounts that have been sent to collections or show significant unpaid balances.
- Public financial records: Includes financial court filings such as bankruptcies, tax liens, or civil judgments that relate to financial obligations.
Employers reviewing these reports should consider the information in context. Financial hardship, medical debt, or temporary economic challenges may appear on credit reports even for otherwise reliable candidates.
Legal Requirements Employers Must Follow
Pre-employment credit checks are regulated by federal law, and employers must follow these rules when requesting and using credit reports during hiring.
It’s legal to do background checks on individuals in most cases, but only if they provide permission and comply with the Fair Credit Reporting Act (FCRA), which requires written consent before pulling a credit report for employment purposes. This disclosure must be presented clearly and separately from other hiring documents.
If you decide not to hire a candidate based on information in a credit report, the law requires additional steps. The applicant must receive notice that the report was used in the decision (even if just a part) and be given an opportunity to review and dispute any inaccurate information.
These requirements are designed to ensure fairness and transparency when employers use consumer data during hiring. Failing to do so can result in lawsuits and fines. So, employers should always consult with their labor attorney to make sure they are complying with all laws.
Besides federal laws, states and local jurisdictions may have applicable regulations as well. For example, California restricts credit checks for employment unless an employee would be in certain managerial positions, handle $10,000 or more in cash regularly, or fit specific criteria. A newly passed law going into effect April 18, 2026 bans credit checks by private employers in New York with only a few limited exceptions. Similar statutes exist in other locations as well.
Using Employment Credit Checks as Part of Responsible Hiring
Background screening has become a standard part of hiring, and credit reports can provide valuable information for certain roles. However, pre-employment credit checks must be used responsibly in compliance with all federal, state, and local laws.
Contact Command Credit today to find out about pre-employment credit checks and background screening solutions that are compliant and available on demand without signing up for a long-term subscription.