Q & A – Can I screen out applicants with bad credit or bankruptcies?

Q. Can I screen out applicants with bad credit or bankruptcies?

A. Federal bankruptcy law prohibits employers from discriminating against applicants who have filed for bankruptcy. This is true even where the job involves cash handling and financial transaction responsibilities. If an applicant cannot, however, meet a hiring prerequisite of being able to be bonded due to a recent bankruptcy, the employer can reject the applicant on that basis.

Although bad credit is not an illegal criterion to use in rejecting applicants at the federal level, discrimination claims can arise. Some state laws prohibit use of credit information or limit its use in hiring. Employers are only recommended to use bad credit as a criterion where it is job-related and permitted by state law. Job-relatedness is best shown where the job requires cash handling or financial transaction responsibilities.