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Employer Credit Checks: A Barrier to Employment for Many, Including People with Disabilities

Checking the personal credit history of job applicants is a common practice for employers today. According to a survey of human resources professionals, nearly half of employers check an employee’s credit history when hiring for some or all positions. Reasons employers may cite for checking an employee’s credit history may include the type of position for which the jobseeker is applying, such as accounting or money management positions, gauging an applicant’s financial responsibility or as another indicator when comparing two or more candidates. Some employers also complete credit checks on existing employees, often when they are considering a promotion. Yet, little is known about what credit checks actually reveal to employers, the consequences for job applicants or the overall economic and social impact of employment credit checks.

For many, employment credit checks create a barrier to employment. Many low- and middle-income job applicants may be denied jobs because of these credit checks. Poor credit tends to be associated with household unemployment, lack of health coverage and medical debt. Research by the Federal Reserve Board found that more than half of all accounts reported by collection agencies on credit reports consist of medical debt. Employment credit checks are a particular concern for people with disabilities and survivors of domestic abuse. Domestic abuse, divorce and medical bills are among the leading contributors to credit problems. Questions about medical debt particularly impact people with disabilities, for whom disclosure of a medical condition may lead to discriminatory treatment.

These factors have little relationship to how well a job applicant would perform at work. Employment credit checks may also disproportionately screen out disadvantaged and minority populations, including people with disabilities. Credit reporting errors are commonly cited as a contributing factor to poor credit. The job applicants who are barred from employment because of credit check results are often the applicants who need jobs the most.

Despite these factors, employment credit checks are legal under federal law. The Fair Credit Reporting Act (FCRA) permits employers to request credit reports on job applicants and existing employees. Employers can reject any job applicant who refuses a credit check. Federal law allows employers to use credit history as a basis for denying employment. One in 10 unemployed participants in a survey conducted by Demos, a U.S. based research and policy center, have been informed that they would not be hired because of the information in their credit report. The FCRA requires employers to provide official notification when a credit report played a role in the decision not to hire someone. However, compliance with this provision is difficult to enforce because employers who are investigated can falsely claim that the credit report was not a factor in their decision not to hire an employee.

Currently, many federal agencies also require credit checks as part of their determination of suitability for federal employment. Credit checks are a means to ascertain credit worthiness, loan risk and financial responsibility. However, in practice, they can end up disqualifying job applicants with poor credit due to job loss, medical expenses and other factors from critically needed employment.

Legislation is currently before Congress aimed at eliminating employment credit checks. Representative Steve Cohen (D-Tenn.) and Senator Elizabeth Warren (D-Mass.) introduced the Equal Employment for All Act (S. 1837, H.R. 645). Our nation needs to determine whether employment credit checks are meaningful indicators of potential job performance or a barrier denying jobseekers, including many jobseekers with disabilities, access to employment that can promote financial stability.


Deepa Goraya is a member of the public policy team for the LEAD Center. A graduate of the University of Michigan Law School, Goraya's work focuses primarily on the areas of civil rights and disability law and policy. 

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