Can a Job Offer Be Rescinded After a Credit Check?

There are many reasons why someone might not get a job or why a job offer could be rescinded after a background check. A failed criminal check could be one. Poor references are another. Yet, few probably realize that companies can and do rescind offers after performing credit checks on would-be employees. 

Employers often use credit checks as part of their background screening process, especially for positions that involve financial responsibilities. It’s not typical practice for any old position, but it’s becoming increasingly common for those towards the top.

Understanding Credit Checks in Employment

Companies often look at a candidate’s financial history to assess their reliability, trustworthiness, and overall suitability for roles where managing money or sensitive information is key. They’re not evaluating finances, per se, but they’re gauging whether someone can keep their own house in order before handing over the keys to theirs.

When To Perform a Credit Check

Credit checks aren’t common practice. However, they’ve become integral to the hiring process for specific roles. Any roles relating to financial oversight, access to sensitive financial data, or upper management where financial decision-making is paramount will likely involve credit checks.

While it might sound like an outrageous breach of privacy to many, companies justify it by wishing to ensure that candidates are financially responsible. And it’s not just a simple credit score check. Employers may be looking for behavior behavior patterns, such as unpaid debts, bankruptcy, or a history of financial mismanagement.

When Credit Check Results Aren’t Accessible

Identity theft is a mounting issue, leading many to take steps to protect themselves. One of these is to freeze credit reports, making them inaccessible to all. This is great for security but raises a problem if applying for high-level positions. 

If this happens, a company typically allows the unfreezing of reports temporarily. But could a refusal lead to a rescinded job offer? Quite possibly. A company will likely see a frozen report as a red flag – something to hide. It could easily be seen as non-cooperation, leading to them withdrawing an offer.

When Would an Employer Rescind a Job Offer Based on a Credit Check?

Typically, companies only rescind offers if they have major reasons to. This decision is not taken lightly. Here are a couple of reasons why an employer might withdraw an offer after a credit check: 

1. If the credit check reveals a history of significant financial irresponsibility. Unpaid bills, missed payments, and bankruptcy are all signs of potential problems that companies might consider.
2. If the credit report shows discrepancies with the information the candidate provided during the application process. This usually happens when the information found on the check doesn’t tally with what’s been told to the employer. 

However, it’s important to stress that negative findings don’t always lead to a rescinded offer. An employer may allow a candidate to talk through the issues; if there are extenuating circumstances, they may be willing to move past the credit report. It’s not unheard of for companies to consider medical bills, divorce costs, tuition fees, etc., that we all face at some point in our lives. 

If a candidate believes they have issues that are likely to be raised by a credit check, it’s always best to disclose them beforehand; it’s better to get ahead of the bad news and be open and honest about it.

Credit Checks & Candidate Rights

The Fair Credit Reporting Act (FCRA) was passed in 1968 and established certain rights regarding credit checks conducted by employers. Companies cannot perform a credit check without the candidate’s explicit written consent. If the check reveals information that adversely affects the candidate’s chances, the company must inform the candidate and provide them with a report. They must also be notified of their rights under the FCRA before any adverse action is taken.

It allows candidates to review the findings and dispute any inaccuracies. If the candidate doesn’t respond, the company is legally free to withdraw an offer after informing them with an adverse action notice. These steps must be taken carefully; failure to follow the law can be a legal minefield.

While credit reporting is generally accurate, mistakes can happen. Recently, Equifax faced a class-action lawsuit after providing inaccurate reports on as many as 300,000 people, leading to many facing higher mortgage repayments than they were expecting.

Frequently Asked Questions

Can a Company Withdraw a Job Offer After a Credit Check?

The short and simple answer is yes. However, companies must ensure they abide by the Fair Credit Reporting Act (FCRA) and follow the process carefully. This means providing a candidate with a credit report, giving them time to respond and challenge, and serving an adverse action notice before officially withdrawing the offer.

Final Thoughts

Hiring is often complicated, but performing a credit check and executing the findings legally and fairly requires extreme care. While a job offer can indeed be rescinded after a credit check, it’s essential to remember that this typically only happens under specific circumstances that indicate potential risk to the employer.

A credit check can be a vital part of the hiring process, but it’s often just one stage of a lengthy process that allows companies to be sure that they’re making the right decision when hiring an individual. ScoutLogic provides some of the most comprehensive screening processes around, covering credit checks, background checks, criminal record checks, drug testing, social media, and more. You find the candidates, and we’ll ensure they’re the right people for your company.

David Garcia

David Garcia, co-founder and CEO of Scout Logic, is an industry leader in the bulk background check world. With his strategic acumen and expertise in the HR sphere, specifically in hiring, recruiting, legal compliance, background checks, and resume screening, he’s an invaluable asset and consultant.

David's counsel extends across the boards of ScoutLogic, YipitData, and Supplier.io, drawing from his impactful stints on the boards of Infutor and Avetta. With an extensive 25-year journey, he champions unparalleled B2B commercial leadership within data & analytics, significantly shaping the HR landscape.