When hiring a new employee, you want to ensure you are making the right choice. One way to do that is to perform a background check. A background check is an excellent tool to verify qualifications and ensure workplace safety. However, running these checks is not as simple as doing a quick internet search. The Fair Credit Reporting Act, or FCRA, regulates how employers gather and use background information.

What Is the FCRA?

The Fair Credit Reporting Act is a federal law enacted in 1970 to protect consumer privacy and ensure accuracy in background reporting. While it sounds like it only applies to credit cards and loans, it actually covers any background check conducted by a third-party company, known as a Consumer Reporting Agency.

If you hire an outside vendor to check a candidate’s criminal records, employment history, or driving record, you are bound by the FCRA. This law gives job applicants specific rights regarding how their personal information is handled and used during the hiring process.

What Is Allowed?

Employers have a lot of flexibility when it comes to vetting candidates, provided they follow the rules. You are legally allowed to look into several key areas to verify a candidate’s fitness for a role.

Criminal Records and Employment Verification

You can request criminal background checks, check commercial driving records, and verify past employment dates. You can also confirm professional licenses and educational degrees. These checks help ensure that your candidate is qualified and does not pose a safety risk to your workforce or customers.

Credit History

For certain positions, particularly those involving financial responsibilities or access to company funds, you are allowed to check credit history. This can give you insight into a candidate’s financial reliability. However, some states limit when you can pull credit reports, so always check local laws alongside federal rules.

What Is Not Allowed?

The FCRA protects applicants from unfair treatment, meaning there are several things you absolutely cannot do during the screening process.

Using Non-Compliant Background Check Services

You cannot use informal online search engines that are not certified consumer reporting agencies. Services that scrape public records but do not adhere to FCRA accuracy standards are illegal for employment screening. You must use a reputable vendor that guarantees compliance and accuracy.

Ignoring Time Limits for Certain Information

For many positions, consumer reporting agencies are barred from reporting negative information that is more than seven years old. This includes civil suits, judgments, and accounts placed for collection. While criminal convictions can often be reported indefinitely under federal law, many states enforce their own strict seven-year limits on criminal history.

Discriminating Based on Report Results

You cannot use background check information to discriminate against applicants based on race, national origin, sex, religion, or age. The Equal Employment Opportunity Commission works closely with FCRA guidelines to ensure that background checks do not create an unfair, disparate impact on minority groups.

What You Must Do?

To legally conduct these background checks, the FCRA outlines a strict, multi-step process that every employer must follow.

Get Clear, Written Consent

Before you order a report, you must notify the applicant in writing. This notice cannot be buried in the fine print of a standard job application. It must be a standalone document solely focused on the background check. The candidate must sign this disclosure to give you explicit permission to move forward.

Adverse Action Process

If a background check reveals something negative and you decide not to hire the applicant because of it, you cannot just ghost them. You must follow a formal two-step adverse action process. First, send a pre-adverse action notice to the candidate, along with a copy of the background report and a summary of their rights. This gives them a chance to review the information and dispute any inaccuracies. If you still decide not to hire them after a reasonable waiting period, usually five business days, you must send a final adverse action notice.

Best Practices for Moving Forward

Navigating background check laws does not have to be overwhelming. To keep your business safe, always partner with an FCRA-compliant background check company. Create a consistent, written background check policy for your organization, and apply it equally to every applicant applying for the same position. By respecting candidate rights and following federal guidelines, you can protect your workplace while building a talented, trustworthy team.