I've received several different forms of this question, but they all center on background checks and credit reports.

But before I start answering this question, I need to put out a big disclaimer. I am not a lawyer. I don't play one on TV. I didn't sleep at a Holiday Inn Express last night. If you need actual legal advice, you need to seek out a lawyer that specializes in employment. Ok, on with the show.

Let's start with why employers use background checks. There are many levels of background checks and they can be requested with or without credit history. Regardless of the level, there are several reasons that employers want to get background checks on potential employees. The primary reason is to try and lower the risk of "negligent hiring" lawsuits.

But, what exactly is a negligent hiring lawsuit? Basically, it's a claim made by an injured party against an employer based on the theory that the employer knew or should have known about the employee's background which, if known, indicates a dangerous or untrustworthy character.

So, for example, Company ABC has an existing employee John. They then hire a new employee Larry. Larry, it turns out, is not a nice person and physically assaults John at the office. John is injured physically and emotionally. John sues Company ABC for large $$$ alleging that Company ABC should have known that Larry had a long history of violent crime and was "negligent" in hiring him.

But that's just one reason. Companies also use background checks to find "resume fraud." You'd be amazed at the number of people who put outright falsehoods on their resume. Also, some state and federal jobs absolutely require background checks to be performed.

The ease with which employers can now get background checks has made it a common part of the hiring process. Heck, I've had background checks performed on me when just volunteering to coach kids in my community.

So, the background check makes some sense, but why would employers use credit history to evaluate applicants? The simple answer here is that some employers believe that if you are reliable in paying your bills, it is a good predictor that you will be reliable in your job. It's certainly debatable whether this is true or not, but you may face this situation. Therefore, employers can ask you to authorize background checks and/or credit reports. But there are lots of rules around what can and can't be done. These are governed by the Federal Trade Commission (FTC) and the Fair Credit and Reporting Act (FCRA).

Ok, so what can you do to prepare for background checks and credit reports?

Step 1: Don't find out about what a background check or credit report says about you when the employer does it. Instead, get ahead of the game by requesting the background check and credit reports yourself. Credit reports are easy. Don't bother with the companies out there who advertise to help with this. Go straight to the source. The Fair Credit and Reporting Act requires each of the three major reporting companies - Equifax, Experian, and TransUnion - to provide you with a free copy of your credit report, at your request, once every 12 months. Here's a link to the Federal Trade Commission site that help you with the Federal Trade Commission's Website how to get them. A background check is something you'll probably have to pay for. But there are plenty of online services that will do it for a fairly small amount of money.

Step 2: Review the accuracy of the information. Once you have the reports, go over them carefully and look for any errors. You can dispute erroneous information before potential employers can see it.

Step 3: Be honest and get ahead of "red flags" with employers. If there is something in your background or credit history that you think may affect employer's decisions, then it probably could. Wouldn't it be better if you "got in front of the issue?" The answer is yes. You may or may not be disqualified but at least you'll have the opportunity to give your side of the story. If you wait for employers to find it in the reports, they may not give you the opportunity. You can also ask employers what specifically they are looking for with a background check. This will help you address any potential issues.

Well, there you go: now you're ready to handle background checks and credit reports without the fear, uncertainty and dread. If you'd like to get more information about the Fair Credit and Reporting Act (FCRA) and all the guidance the federal government gives, try going to: the Federal Trade Commission's Website. You can read the act itself (mind numbing legalese) or some of the opinions and educational material (which is much easier to digest).

Last updated: January 2010