Your FCRA Permissible Purpose to Order a Background Check & Why It Matters

March 06, 2024
Checkr Editor

Editor’s Note: This article is authored by the Checkr Compliance team.

The Fair Credit Reporting Act (FCRA) is a federal law that applies to all consumer reporting agencies (CRAs), like Checkr, and anyone else using background check reports as part of their business operations. To order and receive a background check from a CRA, the FCRA requires an organization to have a “permissible purpose.” This is something every Checkr customer should have when signing up.

The FCRA specifies permissible purposes

The FCRA is a federal consumer protection statute that sets out specific “permissible purposes” for which background checks can be conducted. It’s designed to protect consumers—the candidates whose information is reported in the background check. Requiring a company to have a permissible purpose before ordering a report ensures only companies with legitimate needs are able to receive background check reports on candidates. These specified permissible purposes include employment, insurance, credit, and more. 

The permissible purpose you choose may also impact which screenings you can order. For example, if you don’t have an employment or insurance permissible purpose, you will not be able to leverage driving records (MVR)  screenings due to federal and state laws governing motor vehicle agencies, such as the federal Driver’s Privacy Protection Act


An employment permissible purpose means you are using a background check report as part of your evaluation about a candidate’s suitability for an engagement, position, promotion, or re-assignment. This can include volunteers and independent contractors as well as W-2 employees. As one of the most common permissible purposes of Checkr customers, our background check platform and API enables you to easily manage your employment background checks.


An insurance permissible purpose is applicable when using a background check report as part of the underwriting process. For example, for insurance reasons, you may be ordering a background check on a candidate applying for homeowner’s insurance or a candidate who needs to drive the company vehicle.

Business transaction

Sometimes, background checks are necessary as part of a business transaction. For example, during the sale of a company to a new owner, either company might order a background check on the principals of the other entity as part of their due diligence prior to the sale. The FCRA provides a permissible purpose when the background check is in connection to a business transaction or business account.


Background checks can be initiated when a candidate is involved in a credit transaction (like a bank loan) or extension of credit (like financing a car). Credit checks can also be ordered as part of the employment process, which is common prior to engaging a candidate for a role where they are handling or responsible for company finances. Credit checks for an employment permissible purpose, will not include all the information typically seen in a credit report.  For example, it doesn’t include a FICO credit score. Checkr offers credit background checks to fit your business needs.

Other permissible purposes include national security investigations; when a consumer instructs in writing to initiate a background check; and tenant screening.

Certifying your permissible purpose

Organizations using background checks must identify and certify your permissible purpose to the CRA conducting the screenings. This one-time credentialing process is conducted by the CRA and may require submitting an application with supporting documentation to confirm the validity of your business, which may include reviewing your EIN and website. An on-site inspection of your physical location is also required to conduct credit history checks. 

Because permissible purpose is an FCRA requirement, you should always consult with your legal counsel to ensure you have the appropriate permissible purpose for your business operations. How you review and evaluate the background check results should also be consistent with your permissible purpose. 

Before you start ordering background checks, you should evaluate your business operations and identify the permissible purpose that best fits your screening needs.

Order a background check today

As an FCRA-compliant background check provider, Checkr offers multiple screening options to meet your hiring needs. Our modern platform provides fast, accurate results and automated workflows help speed your onboarding.

Log in to your Checkr dashboard to order a background check.

New to Checkr? Get started.

Get a background check today


The resources and information provided here are for educational and informational purposes only and do not constitute legal advice. Always consult your own counsel for up-to-date legal advice and guidance related to your practices, needs, and compliance with applicable laws.

Subscribe to Our Newsletter

Ready to give us a try?