Quirky Question #203, Colorado Applicant Credit Checks


We are a Colorado company which manages apartment complexes and use background checks including credit checks as part of our applicant screening.  Yesterday, an applicant objected, writing on the application “I do not consent – this is illegal under Colorado law.”   Is this a change in the law?

Answer: By  Steve Bell and Judy Sha

Steve Bell

Steve Bell

Judy Sha

Judy Sha

Yes.  Colorado just enacted the Colorado Employment Opportunity Act which requires an employer, other than a bank or financial institution, wishing to run a credit report on its applicants, to “demonstrate that the report is substantially related” to the position and disclose the need for the request in writing to the employee. “Substantially related” means that the information contained in a credit report is related to the position for which the employee is being evaluated.

Positions for which a credit check may be requested include:

  1. Executive personnel;
  2. Management personnel;
  3. Officers; or
  4. Employees who constitute professional staff to executive and management personnel


The position must also involve one or more of the following four responsibilities:

  1. Setting the direction and control of a business, division, unit, or an agency of a business;
  2. A fiduciary responsibility to the employer;
  3. Access to customers’, employees’, or other employer’s personal or financial information other than information customarily provided in a retail transaction, or
  4. The authority to issue payments, collect debts, or enter into contracts.

Employers may also use consumer credit information for employment purposes for positions involving contracts with defense, intelligence, national security, or space agencies of the federal government.

As you can see, whether you can run a credit report depends on the nature of the position for which the applicant has applied for.  For example, your leasing managers are management personnel who have access to customers’ personal financial information, thus these positions will likely qualify for a credit check. The janitorial staff positions probably would not qualify.

Be advised that if you are refusing to hire the applicant based on the information you obtain through a credit report, you must disclose that face to the applicant as well as the particular information upon which you are relying in making your decision.

Additionally Colorado’s statute allows, but does not require, an employer to  inquire further of the applicant to give him or her the opportunity to explain any “unusual or mitigating circumstances where the consumer credit information may not reflect money management skills but is rather attributable to some other factors, including a layoff, error in the credit information, act of identity theft, medical expense, military separation, death, divorce, or separation in the employee’s family, student debt, or a lack of credit history.”  Given the EEOC’s recent positions disfavoring the use of credit checks, allowing the applicant to provide the explanation will strengthen your defense to any challenge the EEOC may muster.

Note that if you employ personnel in other states, many impose more stringent requirements with respect to allowing employees to explain bad credit results.

Stephen Bell

Steve is a partner in the Trial group.

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