Career Planning Links

Job Hunters: Learn the “How & Why” of Background Checks

Thanks to the Fair and Accurate Credit Transactions Act of 2003 (FACTA), consumers in the Midwest are now entitled to one free copy of their credit report per year from each of the three credit bureaus—Equifax, TransUnion and Experian. Consumers may order their reports by mail from: The Annual Credit Report Service, P.O. Box 105281, Atlanta, GA 30348-5281; online at; or by phone at (877) 322-8228.

Job hunters may find this new right particularly timely since pre-employment background checks, which often include credit checks, are becoming more common.Companies are taking a closer look at the personal and financial histories of prospective employees due to post-9/11 safety and security concerns and fallout from corporate scandals such as WorldCom and Enron.

Federal and state laws require that background checks be conducted for certain jobs, such as those that involve work with children, the elderly or the disabled. Further, many state and federal jobs require a background check and, in some cases, an extensive investigation for purposes of security clearance.

Given this level of scrutiny, job hunters will do well to learn the why and how of background checks. A good way to start is by reading the “Employment Background Checks: A Jobseeker’s Guide.” It’s a report developed by the consumer advocacy group Privacy Rights Clearinghouse. Access the report at by clicking on the “Background Checks and Workplace” channel on the homepage.

Consumer advocates concerned
Consumers are entitled to certain rights under the federal Fair Credit Reporting Act (FCRA). Though the law is designed to promote accuracy and ensure the privacy of the consumer information gathered by credit bureaus and other consumer reporting agencies, some consumer advocates question whether the FCRA goes far enough to protect the privacy of consumers. They argue that in-depth background checks into individual’s personal history could unearth information that’s not applicable to the job or is taken out of context. A further concern is that the information could be used illegally for hiring purposes.

How background checks work
After collecting data on an individual at the request of a creditor, employer, insurer, or another business, a consumer reporting agency will assemble what’s called a consumer report. Consumer reports contain information about a person’s credit and personal characteristics, character, general reputation and lifestyle.

An employer must obtain written permission from the individual to obtain their consumer report. The authorization must be on a document separate from all other documents such as an employment application. The employer must also notify the individual in writing—in a document specifically for this use—that a report may be used.

The employer can hire a consumer reporting agency to gather and disseminate the data, or they can conduct the background check in-house. Whereas a background check conducted by a consumer reporting agency is covered by FCRA, in-house background checks are not. State laws, however, may place restrictions on the information that an employer can prospect for during an in-house investigation.

What can be included in a background check
Background checks can range in depth and breadth from a verification of the individual’s social security number and credit check, to a more extensive inquiry into his or her driving records, vehicle registration, criminal history and credit, education, court and drug test records. For sensitive positions, according to the Federal Trade Commission (FTC), it’s not uncommon for a company to order an investigative consumer report—a report that includes interviews with an individual’s neighbors, friends and associations.

The FCRA prohibits consumer reporting agencies from including the following information in a consumer report: Bankruptcies after 10 years; civil suits, civil judgments and records of arrest, from date of entry, after seven years; paid tax liens after seven years; accounts placed for collection after seven years; and any other negative information (except criminal convictions) after seven years. In addition to these restrictions, many state labor codes and state fair employment guidelines further limit the content that can be included in a background check.

In the event of an adverse action
Before an employer turns down an individual for employment as a result of what’s included in a consumer report, they must provide him or her with a “pre-adverse action disclosure,” according to the Privacy Rights Clearinghouse. This includes a copy of the background check report and an explanation of the individual’s rights under the FCRA. After taking adverse action, the employer must then give the individual an “adverse action notice.” This document must contain the following information:

Now available to consumers
FACTA, the same law that entitles consumers to free credit reports, also gives consumers the right to view their records that are maintained by the same agencies that furnish consumer reports to businesses. ChoicePoint is one such company that maintains a series of databases on consumers. For more information, visit the consumer arm of this agency at

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