Estimated reading time: 14 minutes

Key Takeaways

• Employers can run credit checks only in limited, job-related situations and must follow strict Fair Credit Reporting Act (FCRA) steps before and after making an adverse decision.

• Background information can be used in hiring decisions, but it has to be relevant, nondiscriminatory, and handled with proper disclosure, consent, and notice procedures.

• Sealed or expunged records are generally protected from employment consideration; candidates have clear rights to use the background check dispute process and correct errors.

• Many states and cities restrict pre-employment credit checks; always verify local rules before implementing or submitting to screening.

• Both applicants and employers should document job-relatedness, use individualized assessments, and promptly address inaccuracies to avoid deny job for credit report mistakes.

Table of Contents

• When Can Employers Run Credit Checks?

• Understanding the Use of Background Information by Employers

• Credit Check Job Discrimination

• Sealed Arrest Records and Employment

• Consequences of Credit Reports on Hiring Decisions

• How to Dispute Inaccurate Background or Credit Reports

• Practical Checklists

• Conclusion

• FAQ

Can employer run credit check? Yes — but only in limited circumstances and only if the employer follows federal and state rules.

This guide explains when employers can lawfully run credit and other background checks, how employers may (and may not) use that information, what protections apply to sealed arrest records, the background check dispute process to fix errors, and best practices for both candidates and employers.

For clarity, a “pre‑employment credit check” means a consumer credit report obtained by an employer to evaluate a candidate's financial history—balances, payment history, collections, bankruptcies—for job‑related risk assessment. A “background check” is a composite review that may include criminal records, employment and education verification, credit reports, driving records, and professional licenses. Throughout, we’ll discuss when employer use background info is lawful, how to avoid deny job for credit report mistakes, and how to navigate disputes step by step.

When Can Employers Run Credit Checks?

Legal framework — FCRA and required steps

The Fair Credit Reporting Act (FCRA) is the federal statute that governs consumer reporting agencies and employers using consumer reports for employment; it requires disclosure, written authorization, and specific notice procedures when adverse actions are considered. Employers asking “can employer run credit check” must first understand these duties.

Before ordering a consumer report, the employer must provide a clear, standalone written disclosure that a report may be obtained and obtain the candidate's written authorization. The disclosure cannot be buried in an application waiver or mixed with liability releases. These core FCRA obligations for pre‑employment credit checks are widely recognized and enforced.

If the employer is considering an adverse action (for example, deciding not to hire or promote based on the report), the employer must provide a pre‑adverse action package. That package includes a copy of the report and a copy of “A Summary of Your Rights Under the FCRA.” The candidate must be given a reasonable time to respond and dispute inaccuracies before any final decision. These notice steps and timelines are detailed in practical resources such as this employment credit report guidelines and discrimination concerns overview and this legal overview of FCRA obligations for employers.

After taking adverse action, the employer must send a final adverse action notice. That notice identifies the consumer reporting agency (CRA) by name and contact information, states that the CRA did not make the decision and cannot explain the reasons, and informs the applicant of the right to obtain another free copy and dispute the report’s accuracy. Each of these steps is a mandatory part of the background check dispute process when screening affects employment decisions.

Permitted circumstances / job‑relatedness

Employers may run credit checks when the information is job‑related — typically roles that involve handling cash, financial decision‑making, fiduciary duties, security clearance, or regulatory requirements. Examples include bank tellers, accountants, credit/loan officers, controllers or treasury staff, positions with access to customer funds or sensitive financial data, and national security roles.

Industry guidance confirms the focus on financial trust and access to assets. See summaries of permissible use and examples of roles in pre‑employment credit check practices and a survey of state and industry restrictions on credit checks. Used this way, employer use background info can be appropriate and compliant — but blanket screening without job‑relatedness increases legal risk and can lead to deny job for credit report errors.

Industry, federal, state and local limits

Some federal regulations and self‑regulatory rules require background/credit vetting for specific public‑trust or security roles. At the same time, many states and cities restrict or ban credit checks for most private‑sector hiring except where narrow exceptions apply. Laws can differ across jurisdictions and industries, with strict definitions of what counts as “substantially job‑related.”

Because these rules vary widely, always check the latest jurisdictional guidance and any industry‑specific mandates before screening. Helpful summaries are available in overviews of state and industry restrictions on credit checks and practical guides to pre‑employment credit check restrictions and compliance. Applicants and employers who operate across states should confirm local requirements or consult an employment attorney to ensure compliance.

Understanding the Use of Background Information by Employers

Background checks = credit reports + criminal history + employment & education verification + motor vehicle records + professional license checks. Employers can review this information to assess risk, verify credentials, and satisfy legal or contractual obligations — but legal guardrails apply.

Employer rights and limitations — what compliance requires

Employers may evaluate background reports but must follow the FCRA: provide a standalone disclosure, obtain written consent, and use pre‑adverse and adverse action notice procedures if adverse information could affect the decision. These requirements are explained in this legal overview of FCRA obligations for employers and reinforced by this employment credit report guidelines and discrimination concerns guide.

Use of background information must also be job‑related and consistent with business necessity. Apply screening policies uniformly; do not target or exclude based on protected traits. For credit checks, document why financial history matters for the specific role and how the policy avoids unnecessary exclusion. Keeping a clear compliance file helps demonstrate good‑faith adherence if challenged.

FCRA notification steps checklist (short form):

• Before ordering: standalone disclosure + written authorization.

• Considering adverse action: pre‑adverse packet with report copy + “Summary of Your Rights Under the FCRA” and a reasonable time to respond.

• After decision: adverse action notice with CRA name/contact, statement that the CRA didn’t decide, and notice of rights to get a free copy and dispute.

For broader anti‑discrimination standards that apply to background screening, including Title VII, see our employee‑focused primer on understanding workplace discrimination laws.

Can employers use background info to deny jobs? — the process that must be followed

Yes — but only when the information is relevant and the employer follows FCRA and anti‑discrimination rules. A lawful decision aligns the risk to the duties of the job and treats all candidates consistently.

Required process, step by step:

• Step 1: Determine relevance and document the job‑related justification for using the information.

• Step 2: If the report contains potentially disqualifying information, provide a pre‑adverse action packet with the report and the FCRA Summary of Rights (see employment credit report guidelines and discrimination concerns).

• Step 3: Allow a reasonable time — often 5–7 business days — for the candidate to respond and start the background check dispute process.

• Step 4: If adverse action is finalized, send the adverse action notice with CRA contact details, the statement that the CRA did not make the decision, and a reminder of dispute rights, as emphasized in FCRA obligations for pre‑employment credit checks.

If automated tools or algorithms are part of your process, review potential disparate impacts and transparency duties. For risks and safeguards with automated screening, see our guidance on AI hiring discrimination and worker rights.

Credit Check Job Discrimination

Credit check job discrimination occurs when the use of credit reports in hiring disproportionately excludes applicants from protected classes (race, national origin, sex, age, disability, etc.) or is applied in a discriminatory manner. Even a neutral policy can be unlawful if it causes unjustified disparate impact.

Legal bases and standards

Under Title VII and similar state laws, there are two main theories. Disparate treatment means intentional discrimination (for example, running credit checks only on women or on applicants of a certain race). Disparate impact means a facially neutral policy — such as a blanket rule against hiring anyone with any delinquency — disproportionately harms a protected group and is not job‑related and consistent with business necessity. Sources addressing these risks include employment credit report guidelines and discrimination concerns and practical summaries of credit‑check obligations and limitations.

Problematic practices include:

• Blanket bans on any candidate with any delinquency or collection account, regardless of severity or age of the debt.

• Selectively ordering checks for certain groups or roles without a business justification.

• Ignoring context or rehabilitation (for example, medical debt during a health crisis or identity theft).

For a broader look at protected classes and employer obligations, visit our overview of protected classes under workplace laws.

Employer best practices to avoid discrimination

• Limit credit checks to positions where you can clearly demonstrate job‑relatedness and business necessity.

• Use individualized assessments; do not apply automatic rejections for any adverse credit mark.

• Document the rationale linking credit criteria to the job, and keep a compliance file.

• Apply the same screening policy uniformly to all applicants for the same role.

• Give candidates an opportunity to explain mitigating circumstances and to dispute inaccuracies.

Employers who center fairness and documentation reduce risk and improve hiring quality. Applicants who suspect misuse or unfair treatment may benefit from reviewing our guide to combating criminal record job discrimination, which covers parallel issues for non‑credit background data.

Sealed Arrest Records and Employment

Sealed or expunged records are criminal records that a court has ordered removed from public view — they are not supposed to be accessible/files for most background checks and generally do not need to be disclosed by the candidate.

Legal protections and employer obligations

Employers generally should not consider sealed/expunged records when making employment decisions; many state laws prohibit their consideration, and CRAs typically should not report them under the FCRA. Practical guidance emphasizes avoiding sealed items in hiring evaluations; see employment credit report guidelines and discrimination concerns and this legal overview of FCRA obligations for employers.

There are exceptions in some regulatory or government contexts. National security roles and certain licensure‑regulated positions may have different access rules. Always verify the specific jurisdictional and industry requirements before deciding.

If you are navigating broader hiring checks alongside sealed records, you may also find it helpful to review our resource on workplace privacy rights and employer monitoring limits.

What candidates should do if a sealed/expunged record appears on a report

If a sealed or expunged record shows up, act quickly. Ask both the employer and the CRA to remove it. Provide a copy of the court order showing sealing/expungement. Contact the court or agency that handled the case for certified documentation and request correction with the CRA or screening vendor.

If the employer has already taken adverse action, you still have rights. File an FCRA dispute with the CRA and consider legal advice about state protections for sealed arrest records employment. If you believe the decision also implicates discrimination, our step‑by‑step resource on how to file a discrimination complaint outlines complaint options and timelines.

Consequences of Credit Reports on Hiring Decisions

Can employers deny a job for credit report issues? Yes — but only when the report is relevant, the employer complies with FCRA steps, and the decision does not have a discriminatory purpose or effect. Employers who skip steps risk legal claims, and candidates who know the rules can protect their opportunities.

FCRA notification requirements — the exact items to include

• Written disclosure and consent before obtaining the report.

• Pre‑adverse action packet: copy of the report plus “A Summary of Your Rights Under the FCRA.”

• Adverse action notice: CRA name, address, and phone; a statement that the CRA did not make the decision; and notice of the right to a free copy and to dispute.

These requirements are detailed in industry and legal explainers, including FCRA obligations for pre‑employment credit checks, a comprehensive employment credit report guide, and a practitioner‑focused legal overview of FCRA obligations for employers.

Recommended employer safeguards to avoid unfair denial

• Avoid blanket disqualifications for any credit issue; evaluate the severity, age, and relevance of the information (e.g., recent fraud vs. an old late payment).

• Use individualized assessments and consider mitigating details like identity theft, medical debt, or major life events.

• Keep contemporaneous records of job‑relatedness, decision rationale, and all communications with the applicant.

• Check state/local restrictions before implementing any credit‑check policy, using jurisdictional summaries like state and industry restrictions on credit checks.

Employers who ask “can employer run credit check” should think through the full compliance lifecycle before ordering any report. Candidates should understand these standards as well — they guide both fair hiring and strong disputes when errors occur.

How to Dispute Inaccurate Background or Credit Reports

Background check dispute process: step‑by‑step for candidates — Step 1: Obtain copies and review

First, get your documents. Request a free copy of your credit report from each of the three major CRAs (Equifax, Experian, TransUnion) through AnnualCreditReport.com. If an employer is considering adverse action, they must give you a copy of the consumer report and the FCRA Summary of Rights.

Compare all reports closely. Flag mismatched names or addresses, unfamiliar accounts, paid items showing as unpaid, or criminal entries with the wrong disposition or date. Note any sealed arrest records employment entries that should not appear at all.

Step 2 — Dispute with the CRA(s)

File your dispute in writing (online portals are acceptable, but certified mail offers tracking). Send the dispute to the CRA that furnished the report used by the employer. Include your full name, address, date of birth, a copy of the report with the error highlighted, and documentation supporting your position (court documents showing dismissal or sealing, payment receipts, identity documents, or a police report for identity theft).

State that the information is inaccurate and request correction or deletion. CRAs generally must investigate within 30 days, with a possible extension to 45 days if you provide additional information during the process. These timelines and your rights are summarized in practical explainers on FCRA obligations for pre‑employment credit checks and employment credit report investigation and dispute procedures.

Step 3 — Dispute criminal record errors

Identify the court or agency that supplied the criminal record. Request certified records (or a certificate of disposition) confirming the accurate outcome — such as dismissal, acquittal, or sealing/expungement.

Send corrections to the CRA or background screening vendor with the certified documents, and ask them to update their files and notify any other CRAs. If a local court record is wrong, work with the clerk’s office to correct the source entry. If a screening company refuses to correct a clear error, send written notice to both the employer and the CRA, and consider legal options. For a legal framework on employer obligations when using background data, see this legal overview of FCRA obligations for employers and this practical guide to employment credit report guidelines and discrimination concerns.

Step 4 — Notify the employer and follow up

Send the employer’s HR or hiring contact a copy of your dispute and supporting documents. Politely ask them to pause any adverse decision until the CRA completes its investigation. Employers are required to provide CRA contact details in adverse notices, and you have the right to dispute and correct inaccuracies.

Document all communications. If the employer proceeds to deny job for credit report issues before you have a fair opportunity to respond, that may violate FCRA notice requirements.

Step 5 — If the dispute is not resolved

If your dispute stalls or the results are wrong, consider escalating: file a complaint with the FTC or your state attorney general, and consult with a qualified employment or consumer attorney about potential FCRA or discrimination claims. For broader discrimination concerns connected to background screening, our step‑by‑step guide on filing a complaint with the EEOC explains agency processes and deadlines.

Timelines and expectations

Typical CRA investigations must finish within 30 days, extendable to 45 days if you submit additional information. Employers considering adverse action should, at minimum, provide the pre‑adverse action packet and wait a reasonable time for your response before finalizing. You can reinforce that expectation in your written request. For a clear overview of employer and CRA roles and timeframes, see employment credit report guidelines and discrimination concerns and this overview of FCRA obligations for pre‑employment credit checks.

If your dispute involves sealed arrest records employment, make sure you include the sealing or expungement order and ask the CRA to remove the entry entirely, not merely mark it “updated.”

Practical Checklists

Candidate checklist

• Before applying/interviewing: check your credit through AnnualCreditReport.com; review public records for criminal history; consider freezing or locking your credit if you suspect identity theft. These steps help you prepare for the background check dispute process if needed.

• If an employer says they will check credit/background: ask which vendor they use and confirm you will receive a copy of any consumer report and the FCRA Summary of Rights if adverse action is considered. For context on compliance duties, see FCRA obligations for pre‑employment credit checks and employment credit report guidelines.

• If you find an error: follow the dispute steps above; send documentation to the CRA and notify the employer in writing. Track the 30‑day investigation timeline and your right to a corrected report.

• If your background includes criminal entries: confirm the accuracy of dispositions, and if sealed or expunged, provide the court order to the CRA to remove it — especially for sealed arrest records employment instances.

• If you suspect discrimination: document facts and timing, and review our resource on criminal record job discrimination for parallel screening risks.

Employer compliance checklist

• Confirm job‑relatedness for any credit check and document the business necessity for the specific role.

• Provide a standalone disclosure and obtain written consent before ordering any consumer report.

• Follow pre‑adverse and adverse action procedures under the FCRA: give the report copy, the FCRA Summary of Rights, and an adverse action notice that includes CRA contact info and the statement that the CRA did not make the decision. For details, see this legal overview of FCRA obligations for employers and industry guidance on pre‑employment credit check steps.

• Check state/local restrictions before adopting credit‑check policies; consult summaries of state and industry restrictions on credit checks.

• Apply policies uniformly and avoid practices that could cause credit check job discrimination; use individualized assessments and consider mitigating information.

• Coordinate background policies with other compliant hiring practices (for example, ADA medical inquiries only post‑offer). For related hiring compliance, see our guide to pre‑employment medical exam rights.

Conclusion

• Employers can run credit checks but must follow the FCRA and state/local rules and limit checks to job‑related situations.

• Sealed/expunged records are generally protected; candidates have the right and process to dispute inaccurate credit or background information.

• Candidates should proactively check reports and promptly dispute errors; employers should use individualized assessments and follow required notice procedures.

If you believe an employer misused your background or credit report, start the background check dispute process now (see steps above) and consider contacting the CRA, the employer, or an attorney if necessary.

Need related information about privacy and hiring? Explore our deep dives on employee medical privacy rights and workplace privacy rights and monitoring to understand other common screening boundaries.

Need help now? Get a free and instant case evaluation by US Employment Lawyers. See if your case qualifies within 30-seconds at https://usemploymentlawyers.com.

FAQ

Can an employer run a credit check without my consent?

No. The FCRA requires a clear, standalone disclosure and your written authorization before a consumer report is obtained for employment. If a company screens you without consent, it risks violating the FCRA’s core requirements. See summaries of FCRA obligations for pre‑employment credit checks and this practitioner note on employer background‑check obligations.

Can I be denied a job for my credit report?

Possibly, but only if the information is job‑related and the employer follows FCRA procedures (pre‑adverse packet with the report and Summary of Rights, a reasonable chance to respond, and an adverse action notice). The decision must also comply with anti‑discrimination laws and any state or local restrictions. For process details, see employment credit report guidelines and FCRA pre‑employment requirements.

What should I do if a sealed or expunged record appears on my background check?

Request removal immediately. Send the employer and the CRA a copy of the court order showing sealing/expungement, and dispute the report with the CRA in writing. CRAs generally must investigate within 30 days (up to 45 if you provide more information). For legal context, review this FCRA obligations overview for employers and practical guidance on employment credit report disputes.

How long does the background check dispute process take?

Most CRA investigations conclude within 30 days, with a possible extension to 45 days if you submit additional information. During this time, provide clear documentation and ask the employer to wait before finalizing any adverse decision. Timelines are discussed in employment credit report dispute guides and FCRA compliance summaries.

Are pre‑employment credit checks legal in every state?

Many states and municipalities restrict or prohibit credit checks for most roles, with exceptions for positions involving finances, security, or regulated duties. Always verify local law before requesting or agreeing to a credit check. For a snapshot of evolving rules, see state and industry restrictions on credit checks.

This article is informational only and does not constitute legal advice. Laws vary by state; consult an attorney for legal guidance.