For many job seekers, getting through an interview is only part of the challenge. In today’s hiring environment, employers often conduct background checks that include credit reports—reports that can quietly and unfairly sabotage your chances of getting hired. What’s worse, you might never even know it happened. While some roles may reasonably involve credit checks, especially in finance or management, others use them broadly and improperly. In either case, there are laws that protect you—and if those laws are violated, you may have the right to take action.

Credit Reports and Employment: What’s Allowed

Under the federal Fair Credit Reporting Act (FCRA), employers are legally permitted to run credit checks on job applicants, but only under specific conditions. First and foremost, they must provide a standalone written disclosure that clearly informs you that a credit report may be obtained for employment purposes. This cannot be hidden in a job application or mixed with other paperwork. Additionally, you must give written authorization before they are allowed to access your report. If an employer skips this step or buries the notice in unrelated documents, they are likely violating federal law.

Unfortunately, many applicants are unaware that a credit report is being pulled at all. That lack of transparency can have serious consequences, especially when the report contains inaccurate, outdated, or misleading information.

The Risk of Inaccuracies—and the Damage They Cause

Credit reports can contain a wide range of negative entries, including old debts, accounts in collections, bankruptcies, and even errors like accounts that don’t belong to you. For job applicants, the presence of any of these marks—whether accurate or not—can raise red flags in the eyes of an employer. This can be especially damaging for individuals applying to roles that involve financial responsibility, access to sensitive data, or positions of trust.

But even worse than the existence of negative items is the reality that many credit reports are simply wrong. Studies have shown that a significant number of Americans have errors on their credit reports, ranging from minor inaccuracies to major mistakes that can affect job opportunities, housing applications, and access to credit. If an employer relies on false or misleading data to deny you a job, and you were not given a chance to respond, the harm goes beyond just inconvenience—it becomes a potential violation of your legal rights.

What the FCRA Requires Employers to Do

The Fair Credit Reporting Act doesn’t just regulate credit bureaus and lenders—it imposes specific requirements on employers who use credit reports in hiring decisions. If an employer decides to take “adverse action” against you—meaning they deny employment or withdraw a job offer—based in whole or in part on the contents of your credit report, they must first provide you with a copy of the report and a written summary of your rights under the FCRA.

This notice must be given before the decision becomes final, giving you the opportunity to review the report and dispute any inaccuracies with the credit reporting agency. If the employer fails to do this, they are violating federal law. Even if the report is accurate, you still have the right to know it was used and to see what it contains.

California’s Additional Protections for Job Applicants

In California, job applicants have even more protection than what the federal law provides. Under California Labor Code section 1024.5, most private employers cannot conduct credit checks on job applicants at all, unless the position falls into a specific exempt category. These categories include managerial positions, roles involving access to confidential or proprietary information, and jobs in law enforcement, among others.

This means that for many positions—such as retail, administrative support, customer service, and most hourly jobs—employers are prohibited from using your credit history in the hiring process. If you were asked to authorize a credit check for one of these roles, or if you suspect your credit was pulled without a valid reason, the employer may be violating state law.

What to Do If You Were Harmed

If you were denied a job and suspect that your credit report played a role, it is important to act quickly. Start by requesting a copy of the report the employer used, and find out which credit reporting agency supplied it. You have the right to dispute any incorrect or outdated information that appears on the report, and the agency must investigate your dispute and correct any verified errors.

In addition to disputing the report, you may also have grounds for legal action against the employer, especially if they failed to provide proper notice, did not obtain your written consent, or used your credit information for an impermissible purpose. The FCRA allows consumers to sue for actual damages, statutory penalties, attorneys’ fees, and in some cases, punitive damages.

Don’t Let a Credit Report Derail Your Career

Your ability to earn a living should not be determined by private credit reporting agencies or the unchecked decisions of employers who misuse them. When credit checks are used in hiring, they must be handled with transparency, fairness, and full compliance with the law. If your credit report was used against you without notice, without your consent, or based on false information, you may have the right to hold those responsible accountable.

Know your rights. Ask questions. And if necessary, speak with a consumer rights attorney who can help you protect your future.