An increasing number of employers are using credit checks to screen potential job applicants. So missed payments on your mortgage, car or credit card could keep you from getting hired.
According to a survey by the Society for Human Resource Management, 60 percent of employers are using credit checks when filling at least some of their openings. Only 35 percent reported checking credit in a 2003 survey, and only about 13 percent did so 1996.
The timing could not be worse.
“At exactly the time everyone’s credit seems to be going down the toilet, more and more employers are using this,” said Nat Lippert, research analyst for the union Unite Here. “You get in a Catch-22: You can’t pay your bills because you don’t have a job, and now you can’t get a job because you can’t pay your bills.”
Unite Here has been active in a recent push for laws to greatly limit employer’s use of the credit reports in hiring decisions.
So far three states have passed such laws — Hawaii, Oregon and Washington, and legislation has already passed in Illinois and is headed to the governor. The laws would make it illegal for employers to access credit history unless they can show that it’s relevant to a job’s duties, such as handling money or having access to customers’ financial information.
Bills have been introduced in 16 other states and the District of Columbia, and Federal legislation is currently pending in Congress.
Businesses have pushed back hard against such laws.
“Is it helpful to the employment process? Employers seem to think yes. They don’t spend money on products they don’t think bring value” said Stuart Pratt, CEO of Consumer Data Industry Association, the trade association for the credit rating agencies.
Pratt says that a credit check gives employers details about accounts in collection, debt levels, bankruptcies and other problems that would cast doubt on someone’s ability to handle responsibility. It does not report credit scores or account numbers.
Pratt also argues that the credit histories are only one factor considered by employers, and that prospective employees are supposed to be given the chance to respond to what their credit check turns up.
But consumer advocates and some job seekers say that candidates are being unfairly judged by the circumstances of their private lives.
“Employers have adopted this method as a proxy for character reference, believing it reflects on people’s ability to handle responsibility,” said Ben Woolsey, director of marketing and consumer research for CreditCards.com. “That’s a bit of a reach.”
Tai Davis used to work in information technology for a financial services firm. Part of her job was helping customers who had been victims of identity theft or other fraud.
“I had access to the social security numbers, credit card numbers, home addresses, bank account numbers of millions of people. For years I safeguarded it,” she said.
Davis said she had medical problems that caused her to miss a lot of work. When she returned from medical leave, she found she had lost her job. With $20,000 in medical bills and no work, her credit eventually took a dive.
“I have been told I can not be hired because of my credit. They will not even interview me,” she said.
Davis said she has applied for all types of jobs, not just financial services. She said a bankruptcy filing would help her fix her credit but she fears it would be an even greater barrier to finding work.
James, a cashier from Nashville who asked that his last name not be used, admits he had bad credit when the store he worked at closed in October 2008. He said he soon had two job offers at other stores, but that both disappeared when his credit history was checked. His unemployment left him homeless for a time in 2009.
James attributes his bad credit to a divorce a few months before he lost his job. “I did the best I could, but at one point, it was make my car payment or make my child support payment and I picked child support. They repossessed my car,” he said.
James said that despite his credit problems, he was an honest worker and never stole a penny from the large deposits he was entrusted with.
Indeed, consumer advocates say the overwhelming majority of job applicants with credit problems don’t steal from their employers and it’s unfair for their credit situation to be held against them.
“In this economy there are all types of very good candidates who will show up with credit problems that have nothing to do with their ability to do the job,” said Maurice Emsellem, policy co-director for the National Employment Law Project.
For some occupations, a credit check might be reasonable, but not in 60% of applications. A divorce with a vindictive ex-spouse can do terrible damage to one’s credit report, but in no way reflects a person’s skills or abilities.
As much as I dislike more government regulation, I think a federal ban on this practice is needed.
This is wrong and a federal ban is needed. These dirtbag employers don’t feel the need to list what their definition of an acceptable credit score is, so they don’t get to use it.
not to mention the millions of people that have been out of work for the past year or so. No doubt their scores have suffered due to their prolonged unemployment. It’s comforting to know that falling on hard times is held against a person. Don’t you all just love capitolism!?
Another fine example of an over thought process that doesn’t need to exist. There are tons of people not able to manage their finances and more importantly people that don’t really care about managing their finances. This doesn’t mean that one can’t perform a job function with less than exceptional results.
This is nothing more than an underfunded study with extremely poor statistical data being reported as valid. OR an overfunded boondoggle with plenty of sauce provided on a daily basis that even the smartest of smart would believe this nonsense.
This ridiculous practice isn’t merely wrong, it’s flat out stupid. Now whereas I can understand the need for honesty when considering a candidate for a position where they are required to handle cash transactions, that has never been an issue since most employers hiring for such positions usually conduct a thorough background check anyway.
But this nosy, intrusive, violation of personal privacy that these outfits engage in nowadays and one of the most egregious affronts to human dignity I’ve ever seen. It’s immoral, it’s unethical, and it needs to be illegal. And it doesn’t take a rocket scientist to understand that if some poor schmuck is having trouble keeping their bills paid, it’s probably because they need a JOB (or at the very least a better paying one).
Time to call on the state and federal governments to shut down this stupid B^ll$#!t before they get it to the point where the only people who have jobs are those wealthy enough that they don’t need jobs.
Just what long-term unemployed people need — one more hurdle to even getting an interview. This is just another way to discriminate against an otherwise qualified worker if the position does not require handling large sums of money. Many people have money problems they never imagined they would have because of the economy. Make this use of credit reporting illegal and invasive. It’s one-sided because they know that applicants don’t have the money to run D&B reports on the companies with which they aspire to interview.
Just so you know how far some of these companies will go, back in the late 1970s recession, I applied for a job at First Federal of Rantoul. As I was a military wife whose spouse was stationed at Chanute Air Force Base, the interviewer continued many times during the interview to ask me where my parents did their banking and how much money they had in their bank accounts. I continued to refuse her the information stating that not only did I not know their banking habits, but that asking me what they had in their accounts was no more their concern than it was mine. Somehow, this interviewer did not view my reaction to her question as a violation of confidentiality. Needless to say, I did not get the job and just before I left First Federal of Rantoul, I promptly withdrew all of the money I had with them and went elsewhere. I also went to the Social Actions office on the base and let them know what happened and to caution other military members that their financial situation may not be secure when doing business with First Federal of Rantoul after my experience.
Credit Checks can weed out otherwise sketchy candidates and show people who are short sighted, irresponsible, and immature. Federal law already prohibits medical collections and bankruptcy from being held against an applicant and more government interference in hiring is not what we need.
Typically employers are not looking at credit scores they are looking for people who open numerous accounts and don’t honor their obligations.
So when you are in too deep go bankrupt and everything else will be cream cheese
This is a simply ridiculous practice. Unless one is going to be responsible for funds or financial decisions, one’s credit history is their business and not a potential employers.
@John – My fear is that an employer will get ALL the financial information, including bankruptcy and medical. Even though they are supposed to disregard them, there’s an old saying, “You can’t UN-ring a bell once it’s been rung.”
If federal law says employers can’t use that information, federal law should prohibit it from being given to them.
It should be illegal to do this in at the very least the states like IL that want to be a haven for illegals. Illegal immigrants often steal people’s identities and destroy their credit. So basically those states should not be allowed to use credit scores for any reason, since the citizens are so much more likely to become victims of identity theft.
Blatant abuse and economic voyeurism, snooping on people for NO GOOD REASON. avery good law
The bill on Governor Quinn’s desk is garbage because it still allows banks and other financial companies to get away with running credit checks on new hires and perpetuates this discrimination. Financial workers were probably hit the hardest in mass layoffs from this recession. Should they be denied work in their profession too? The bill should be vetoed and re-written to not allow any exemptions to the law.