As more and more individuals face being denied gainful employment due to poor credit history, lawmakers from a growing collection of states across the country are moving to ban the use of credit reports in hiring decisions.
In previous articles, we covered how the practice of utilizing an applicant’s credit history works. Because of liability concerns, many former employers won’t offer much these days besides an employee’s dates of hire and position held. Not a lot to go on if you’re a business owner.
Employers are taking a look at an applicant’s credit histories because they say that a measure of the individual’s honesty, reliability and maturity can be inferred from their past financial management.
The problem is that although there are deadbeats and irresponsible individuals with bad credit, there are also individuals who through no fault of their own have acquired debts resulting from situations completely beyond their control. A child falling ill, a factory layoff, a missed payment or two on student loan…it’s not as though these people went out of their way to place themselves in these situations.
And what happens next? You fall on hard times; you work to get yourself out of them only to find you can’t because no one will hire you based on a poor credit score.
Although an employer needs an applicant’s permission before running a credit check, it still puts a job seeker in a tough spot. Option A, you give permission and offer up information that could hurt your chances of getting a job or Option B, refuse the check and incur suspicion thereby hurting your chances of getting that position.
This has not been lost on state delegates and lawmakers who want to ban credit checks from the hiring process. More and more states are conceiving laws that will open doors wider for those with poor credit history.
16 states from Oregon to South Carolina are all now in varying stages of implementing bills that would effectively ban credit history from being taken into consideration on job applications. A bill encouraging a ban on a national level was introduced by Rep. Steve Cohen from Tennessee in the summer of 2009 and is currently languishing in the purgatory of committee review.
Kirill Reznik is a Maryland delegate who is responsible for drafting a bill in his state currently under consideration. He thinks credit history places an unfair burden on those who want to get back on their feet: “We are in the great recession and this creates a vicious cycle. People lose their jobs, that naturally precipitates them, getting behind on bills, their credit scores go down, they are trying to find a job to pay off bills, and employers won’t hire them because of their credit score.”
Kim Hixson, Wisconsin Rep, said, “If somebody is trying to get a job as a truck driver or a trainer in a gym, what does your credit score have to do with your ability to do that job?”
The counter argument from employers is that the real red flags they are looking for are debt collections and legal judgments on a person’s record rather than school loans and medical bills. Mike Aitken of the Society for Human Resource Management said that a ban would deprive hiring managers of an effective hiring aid.
Aitken was noted for saying that although a faulty record of paying bills on time may not indicate they’re a thief or fraudster, but it could offer insight into whether they have the maturity and responsibility to handle an adult working position.
Kim Hixson disagreed saying that she has never heard of a concrete study that can offer a correlation between poor credit and poor job performance.
What needs to be understood, and I don’t think many of our government representatives are “getting” is that it currently is not legal to use a credit score to determine employment. A pre-employment credit report simply gives an employer an overview on how a person handles their finances. There is no score reported, nor does a check for employment purposes take any points away from a person’s current score.
The concerns of employers are justifiable. They risk damaging their own business not having the tool to assist them in making a smart hiring decision. Granted, while credit reports shouldn’t apply to all positions, they definitely should be made available for positions which deal with money. Would you put someone in charge of your finances who can’t manage their own?
I think it’s funny how every politician quoted in this article used the term “credit score” and then the article pointed out it’s not legal to use a score. Really shows how much research has gone on behind the scenes and yet, the government wants to tell us how we can hire people.
I agree with this ban. However I think their should be a clause allowing companies hiring employees that will have direct access to their accounts or money such as accountants or bank tellers to have a credit report run. It should just not become a universal means of denying people employment. That would create yet another vicious cycle implemented by creditors.
in this kind of economy everyone who has had a house go into foreclosure or resulted in someone filing bankruptcy would show up negatively on a credit report. I was unemployed for over a year and stuff happened to ME. I am an honest person who respects his employer 100%. so to be turned away from a job based off of a credit report does nothing to help unemployment that is only getting worse, and will only make more credit problems. and it all just cycles downward. YOU PAY ME. I should be doing a credit check on the company to make sure they can even put out paychecks that wont bounce before I start… i have been there… and they hurt my credit… paying bills then having your work check bounce SUCKS! was it my fault? nope!… Credit checks to work? HECK NO!
Interesting article, but the article fails to understand the lack of validity of a credit report as a viable source of judgement. Credit Scores are not as manageable as people like to assume. Such as your credit is ‘dinged’ with each inquiry, for starters. Secondary is that it is much easier to get into bad credit, than good credit. The system is quite literally designed for you to not have good credit. There is much more weight on the negative reports than the good ones. The reason for this is because with bad credit comes higher loans and interest rates; the profit margin is much higher. There was even a time when the public wasn’t allowed to look at their own score…. I wonder why that may be…
We also need to realize a level of confidentiality here. If there is a study to prove correlations between poor money management and job performance, then how does this relate to everything else? What about infidelity? Or more importantly…. race? gender?
We all have correlations, stereotypes, and statistics that we fall into. We actually now have laws stating that we cannot be biased on most of these things. Now, how is it that poor money management separate? Studies do “support” many correlations, but then again if we really support those correlations then we have a society only ran by middle aged white men… and we all know where that lead us just a few years ago.
“Employers are taking a look at an applicant’s credit histories because they say that a measure of the individual’s honesty, reliability and maturity can be inferred from their past financial management. ”
Wow. Really? Great argument. Love this line of reasoning.
What’s next? My medical files?
Those might give a potential employer an idea of how well I take care of myself. A health history would also convey my honest behaviors, reliability, and maturity.
Sheesh
I don’t blame employers for wanting to see what an applicant’s credit looks like. However, if the applicant has less than stellar credit but is qualified for the job in all other respects, I would hope the employer would take the time to find out why the applicant’s credit is not up to par. Perhaps the applicant was laid off previously and was not able to find other employment right away due to the recession. Or the person could have gone through a bad divorce or even been the victim of identity theft. Theer are many reasons for bad credit and not all of them mean a person is irresponsible
Correlation is not causation. Even if there were a correlation between bad credit and bad employees, given how easy it is to get into bad credit, it feels a bit like saying people with black hair are more likely to become dictators, based on Hitler, Mussolini, Saddam, etc. Maintaining good credit or having bad credit is a specious means of determining eligibility for work or a high degree of ethics.
I think the credit checks have their uses for specific professions…getting as job in law enforcement or
working with company finances. But credit checks for customer service reps, dock workers, grocery clerks?
is that really necessary? Employers need someone to assure them not every employee is going to rip them
off or be a liability just because of some debt. We all have debt and it’s often because hey, stuff happens.
Don’t penal;ize people for wanting to get back on their feet
It seems like the lawmakers need to read up on the laws of employment credit reports. I would not like to put someone in a position of handling money and balancing accounts if they can’t even do it themselves. It is simply a way of life now days that most individuals life pay check to paycheck. I do agree that when applying for some positions it is not necessary to check someone’s credit. Get the law books out people and educate yourselves.
Checking credit score is not a good way to judge an individual’s dependability. When it comes to credit how many people out there knows about the 45% rule. The 45% rule basically means if consumers uses over 45% of their credit credit limit it will hurt their credit. So it doesn’t matter if I am a careful spending and only carries a $300 balance on a $400 limit card or a irresponsible spender with a $5000 balance from a shopping spree at Bloomingdales on a credit card with a $20k limit, the careful spend will get hit with a lower credit score.
I agree that there should be some limitations to the credit checks not paying credit cards onetime I would say shows your dependability but your house going into foreclosure due to a loss of a job should not.
I’m thinking background checks by employers’ human resource departments have left behind the “human” aspect. I want employers to look at my job application or resume and understand what they are looking at. They are not looking at a robot.
If society wants me to provide for myself, why put up more employment barriers? I already have to deal with being 55, a woman, a Native American, being 25 pounds overweight, having brown hair, having brown eyes, having brown skin, having short hair, not having a professional manicure, let alone pedicure, having to wear re-cycled clothes and shoes from Goodwill, having to buy food with an EBT card, not owning a home, having a car that has a broken fender I can’t repair before all my other immediate needs, not having a home phone, having a cell phone I’m going to lose after this month runs out (but the 2-year agreement will still need to be paid anyway), having to apply for 3 or more jobs per week because the Employment Security Office says I won’t qualify for benefits if I don’t, then employers have the nerve to ask who else have I applied to (who can remember 18 different job application sites!), where I live, where I’m from, how many jobs I’ve had because I needed to work to provide for myself and why I don’t have any hobbies!
Employers are already searching into my background and credit history and never put me on their interview list! Unbelievable!
Two employers have put their information on my (a business that has put themselves on the market to store employer-provided information that’s usually held against a prospective employee) driving employment record, when in fact, they were never my employer. Yet, other employers believe their information without asking me anything about why they do not appear on my resume. I have never left an employer off my resume because I was fired — I was fired in 2002 and I deserved it due to lack of experience. Luckily, other employers have looked beyond that moment in time and hired me. I’ve never been fired since, but I have been given a Reduction in Force (which is just as bad). Employers need to believe the applicant, period.
I have had 22 jobs in the past 10 years in order to provide for myself. I’ve never recovered fnancially well enough to pay off my school loans and other debts. I can’t recover without a job.
I have such a wide variety of experience and skills, I have no idea what I ever wanted as a career to begin with! The only things I want to accomplish is to have a job to go to every day, bring home a paycheck every week (that doesn’t bounce), and make online payments to my creditors until I am debt free. I can’t do that without a job.
How in the world can I achieve my small dreams and then get to thinking about big dreams, when I am not hired because of so many jobs and now because of my credit history!! I can’t rise above without a job.
Mark my words, when I do make it big, I’m only going to hire people who NEED and WANT a job. I’m going to meet every single applicant who has taken the time to fill out a job application to work for me. I will treat them like a human being. I will leave it up to them to determine if they are qualified to work for me. If it’s left up to me, I’m going to find a job for them to do. Then I’m going to pay them a living wage plus some more. Until then, I’m going to continue to fill out job applications until the day I die because I am a damn good employee who shows up every day and does her job, then asks for more to do! How many employed people do that now?
I don’t think my insurance company ought to raise my rates because of my credit history either! I have had no accidents but now they raise my rates because I have a poor credit history. Good grief. The poor pay more in the USA.
I have to pay higher interest because of my credit history, which someone with a good credit score gets 0% interest. I sure could use 0% interest for a couple of years!
Who is really paying for services the richer enjoy? I’m thinking its the working (blue collar) man (or woman in my case) because we pay more for the same services! I think the higher credit score people ought to pay higher jobs, loans and insurance.
When the banks defaulted they got a free ride out of their debt from our Government! Now that my credit is in the toilet, where is my free ride? Do I get a clean slate? No. If I file for bankruptcy, I have to “qualify” with income information from the past 5 years. Give me a break!
I’d give almost anything to be able to start over from zero debt, but I need and want a job first.
I’m thinking using credit reports against unemployed and broke human beings (like me) only keeps us working class down and out in order to keep the service programs afloat. I believe it is the poor who support the richer humans’ privileges (in some important areas).
I don’t want welfare, I want a job! I want a job that pays at least $20 an hour because by the time taxes are taken out it will turn into minimum wages by the time I get it home. If I don’t meet every job qualification, I’m sure I can learn the rest. I can’t do that without a job.
Stop the EMPLOYMENT BARRIERS! I’ve had enough of them. I’ve worked for 40 years already and still NEED and WANT to work. I know social security isn’t going to be there when I retire at 62. I’m going to have to die in the saddle.
You people with fat wallets, why don’t you hire people like me to work for someone else if you don’t need work done.
Don’t laugh. It ain’t funny. The working class didn’t put our economy in the crisis mode toilet. Think about it.
I believe that this is an issue that needs to be deallt with. First of all when i apply for a job, the employer should check my job references to make sure, that I will be a good employee, how I deal with my money whether good or bad is noones business but my own. I wonder what will be next? my medical records, or maybe what type of way i spend my personal time? There needs to be a line drawn, the way i see it is i am being interviewed to be hired not bought. What really gets me is how these employers justify looking trying to look into my credit. What happens if a person hits rock bottom and now gets turned away from a job, due to the fact that these person hit hard times. Lets put privacy back where it belongs with a closed door.
There is and has never been any correlative data to suggest that a person with bad credit is dishonest, incapable of managing other peoples money or is an under performing employee. The only things credit reports are used for in hiring, is to discriminate against minorities and women.
Aren’t some of my personal records confidential?
The following types of information may be useful for an employer to make a hiring decision. However, under the federal Fair Credit Reporting Act, the employer is required to get your permission before obtaining the records. (See PRC Fact Sheet 11, “From Cradle to Grave: Government Records and Your Privacy,” http://www.privacyrights.org/fs/fs11-pub.htm)
Employers checking your credit without your written permission is againt federal law.