The sticky question of the pre-employment credit check
Out-of-work jobseekers are facing a significant obstacle to finding employment and restoring their financial health: the pre-employment credit check, which is being used increasingly often by staffing professionals.
Companies who perform these credit checks say, in their own defense, that they are only engaging in due diligence and looking for general red flags such as a lack of trustworthiness or self-control.
However, lawmakers and groups such as the ACLU are saying that this practice invades privacy, has little to do with performing most jobs successfully, and forces people who have lost their jobs into a downward spiral of debt.
For a sign of the times, here’s a telling anecdote from recent The New York Times story “Another Hurdle for the Jobless: Credit Inquiries“:
Out of work since December, Juan Ochoa was delighted when a staffing firm recently responded to his posting on Hotjobs.com with an opening for a data entry clerk. Before he could do much more, though, the firm checked his credit history. The interest vanished. There were too many collections claims against him, the firm said. “I never knew that nowadays they were going to start pulling credit checks on you even before you go for an interview,” said Mr. Ochoa, 46, who lost his job in December tracking inventory at a mining company in Santa Fe Springs, Calif. “Why would they need to pull a credit report? They’d need something like that if you were applying at a bank.”
Once reserved for government jobs or payroll positions that could involve significant sums of money, credit checks are now fast, cheap and used for all manner of work.
The practice is definitely on the rise. Forty-three percent of companies conducting any type of pre-employment screening use credit checks for some or all employees, according to a 2006 study by the Society of Human Resource Management. The number was at 40% in 2004, and just 25% in 1998. We are almost certainly in excess of 45% today, and it’s quite feasible that the number is greater than one-half.
What are the current rules in the U.S. about checking an applicant’s credit? Reports Dana Dratch in her article “States weigh limits on credit checks for employment“:
Absent a state law or change in national law, employers can (with an applicant’s permission), pull a credit history and decline to hire a candidate based on what they find — even if the information has no relation to the job. And with many Americans struggling financially simply because they are out of work, legislators are seeking to prevent something they see as needlessly punitive.
While most states have no restrictions against checking an applicant’s credit, Hawaii tightened limits on the practice just last month. (Washington State had set up limits two years ago, but was the only state to do so at the time.) These are the only two states with any laws on the books about the practice, although, at the time of this writing, Connecticut, Missouri, New York and Texas are all considering proposals to limit the use of credit checks in pre-employment screening.
On the national level, Representatives Steve Cohen of Tennessee and Luis Gutierrez of Illinois have sponsored H.R. 3149, the Equal Employment for All Act, a bill that aims to prevent employers from using credit reports in their hiring or promotional decisions. As reported by Lewis Green on credit.com:
Speaking at the bill’s launch, the two congressmen raised concerns about the mounting financial pressures faced by people who are coping with unexpected difficulties, such as job loss and medical bills. Gutierrez pointed out that the major obstacle standing in the way of some people’s financial recovery is securing employment. But if they continue to be denied a job because of their credit report, it could lead to a vicious cycle. “Right now the number of U.S. employers conducting pre-employment credit checks is on the rise and too many Americans are caught in the preventable cycle of debt,” Gutierrez said. “They have been hit hard by an economy in crisis, they have fallen into bad credit and as a result they cannot do the one thing that would enable them to climb out - get a job.”
The bill does make allowances for credit scores to be checked within some limited categories of employment, such as jobs involving national security or a large amount of financial responsibility. However, Gutierrez emphasized that those are exceptions rather than the rule, and said that the ability to perform most roles is unrelated to a person’s credit history.
All proposed legislation contains exceptions for persons working with national security and/or large amounts of money. In addition, no one is proposing that criminal background checks be limited — only credit information, in jobs where one’s credit history is not relevant.
Readers, what is your take on this? Do you work for a company that checks credit reports? If so, do you recommend the practice? On the flip side, is there anyone out there who has eschewed credit checks, even if they are legally available? Finally, we’re extremely intrested in hearing from HR professionals in Hawaii and Washington who have been dealing with changing state laws. Talk to us in the Comments!
[...] View original post here: Career Transition Services Blog at RiseSmart » The sticky question … [...]
The use of credit reports in hiring decisions for most positions, is as ridiculous as the use of credit scores in setting auto insurance premiums and renting people apartments.
The best indicators of someone’s future job performance are: suitable training and education for the job in question, prior or current job performance, evidence of preparation for the interview, a succesful interview that verifies knowledge and skills, and good character references. None of these will assure a good employee, but they are a better indicator than a credit report.
People who steal from work do so for many reasons and you would have to know a lot more about a person’s life than their credit score to be able to make a determination of risk. A bad credit score does not necessarily mean you have been irresponsible. Your credit score can easily be affected by spouses, identity theft, layoff of you or your spouse, serious illness affacting your family, an aging parent coming to live with you and additional unexpected expenses. Life happens and a credit score does not tell the whole story.
A perfect score does not mean that you will make a better employee. For all you know, it may mean that you have been stealing for years to make sure you pay your bills on time. ( That was a joke!)
They also need a bill for the use of credit scores for auto insurance premiums. That whole thing is beyond ridiculous. The logic is seriously flawed and I can’t believe it is not challenged vigorously.
They justify it by saying that people with lower credit scores are more likely to be bad drivers. If that is the case, then a credit report is unneccesary, because a review of an applicant’s driving record will tell you what kind of a driver
someone is.
A person’s driving record is the best indicator of what kind of driver he or she is. Not whether or not they paid their Visa bill on time.
The apartment credit check thing is crazy too. A person’s prior rental history, rental payment history,proof of stable income sufficient to pay the rent, criminal background check and references from prior landlords about what kind of tenant the applicant is, will tell you what kind of tenant the applicant will be. If a person has never had a rent check returned or paid rent late, why do i care if his student loan is past due? All that tells me is that if times get rough, he’ll make paying the rent a priority.
Credit checks should be used for the extension of credit. Credit cards, personal loans, mortgages, auto loans, etc. No way would I loan someone money who had a history of not paying it back on time. But this other stuff it is used for is ridiculous.
Thanks for bringing this up. I agree with the comments above. I really hope the Equal Employment for All Act passes. Sure, credit checks might be useful in some cases, but often it’s ridiculous to expect good credit to be correlated with good job performance. Further, credit checks often put potential employees in a catch-22. If they don’t have a job, they are more likely to have poor credit and thus more likely to remain unemployed. People of color on average have lower credit, making this a discriminatory practice. Not to mention that credit reports more often than not contain inaccuracies.
If you would like to help us stop the often unfair and discriminatory practice of pre-employment credit checks, please join us.
http://www.facebook.com/group.php?gid=98502858415
http://www.creditcatch22.org/
I am a professional who lost my job due to the collaspe of financial market. I have not been able to secure another suitable professional position in over two-years. I have been able to secure a job that pays an hourly wage of $10.00 - which I am very grateful to at least have some income coming. I have long exhausted all my savings and retirements funds and it’s does not meet my basic living expenses such rent, heat and electricity. There isn’t any money left to pay the credit cards balances I had prior to my loss of employment - which have resulted in a number of unpaid bad debts. Prior to my loss of employment my credit rating was stellar. I never envisioned my life would take such a devasting turn with obtacles that I can not challenge. I have a solid accomplished work history -which I worked very hard to achieve. With the employers ability to base there decision on my ability to be a productive and a successful employee because I lost my ability to make money to pay my bills is unfair - and discriminatory. What’s going to happen to the thousands of people like me that are suffering and trying very hard to rebuild their broken lifes. My goal is to utilize the job skills I have worked so hard acquire - were more self motivated to work harder than we ever have - there’s needs to be a fair and equal way to judge a potential candidate- don’t judge us on hardships that we didn’t cause!
I totally agree and hope this bill passes.
I’ve been responsible all of my life. As an only child, I’ve supported my mother since I was 21 and when my father’s business failed, helped him out as well. I’ve prided myself for being able to help my parents.
When my income level was at a point where I was able to pay my bills and help my parents, I enrolled in school at night and got a B.S. degree while working days, albeit at a later than typical age. With my 4 yr. degree, I thought I was finally going to able to work my way up the social ladder and perhaps even buy my mother a home (we’ve been renting all our lives).
Then, when everything seemed good, I got laid off from my job and my father got sick. He passed away half a year ago and I was left with all the bills and funeral costs. I found out the hard way that cemetaries don’t finance their services and plots so I’ve had to use my savings.
As the months passed, the unemployment checks were not enough to cover all of my bills and my savings were depleted ($20k). I even cashed in a portion of my retirement, but that’s gone now as well. I’ve had to let some accounts go past the 30day mark as I juggled and prioritized my bills with the little incoming cash flow I had each month.
In the meantime, I’ve been looking aggressively for a much needed job. I thought, worse comes to worst, I would take any job, even one reserved normally for high school graduates.
However, I found out the hard way that because of my recent credit history of late payments, no one would talk to me once they ran my credit score. I only have three credit cards and every one of them lowered my available credit to $100 over my balances, which I found out was lowering my score too. Then on top of that, after 2 late payments, one of my cards raised the APR to 29%.
So now, I’m in this terrible cycle where my credit is getting more dings and each employer is passing on me because of my credit score.
Other than the credit score, I’m very qualified for the jobs I’ve been applying for. I’ve passed every pre-employment test thrown at me (some required a battery of tests-math and reading comprehension) and scored at the top each and every time. The interviews I’ve had before the checks were all pleasant and gave me impressions that I was a top candidate. Then, each time they would run my credit, they would immediately lose interest and most wouldn’t even have the courtesy of telling me that I wasn’t being considered anymore, let alone give me a reason why.
I don’t know how to break this cycle other than try to get some under the table job, which is illegal, just to stop these dings on my credit and pay off my bills to try to get my score back into shape.
I’ve been, what I’ve thought, a hard-working, tax-paying, responsible person all of my life, but now find myself being talked to like I’m a criminal of some sort.
These stories are touching, but at the end of the day credit is correlated with the likelihood of employee theft. Also, most employers that pull credit are pulling the employment version of the report which doesn’t include score. They do this to verify employment history. The companies like insurers and employers that are currently allowed to pull credit on their applicants aren’t in that position because of some legal loophole. They are in that position because it has been recognized that they have a legitimate reason to do so. While it is true that there are exceptions, for the most part people with worse credit represent a higher risk and it is up to companies to decide for themselves the level of risk that they find acceptable before they put that employee behind the register, tallying their books, or locking up for the night.
I have lost my job and have not been able to pay my credit cards, bills etc. When I talk to the creditors, and explain that I know I am responsible and that I want to pay but I have not found a job at all. That as soon as I am able, I will pay all my bills. They tell me…… If you don’t pay up , you will not get a job because of your credit history……….so then, How am I paying back without a job?……I’m confused…so what do I do in the mean time, go out and put up a sign that says “I NEED TO PAY UP…. OR ELSE”…..????? I don’t understand. Am I living in the US? or should I just blame TEXAS!
I lost my job, foreclosed on my home and filed bankruptcy. Can employers check your credit before they interview you? I was told that they have to have a written permission from you. I had an interview and it sounded promising but about three days later I received an email saying that although I had the qualifications they decided on someone who was better qualified. I’ve been turned down on other multiple job apps.
All this makes me very nervous. I have been out of work for over a year and I finally have an appointment with a placement service. If they require a credit score or credit history I believe my chances of getting employment will be slim to none. Like so many others, my husband and I have fallen on hard times. We both lost our jobs and then the house was gone. The credit card bills have just piled up and I feel like we are under six feet of water. And we have tried to talk to the credit card companies about the bills and all we get are strong arm tactics. I do hope something is done. What an invasion of privacy. My financial difficulties should not be taken into account. I am not applying to be a CFO or president of a company. I am just looking for a job so I can keep on living.
If it sounds like I am frustrated, that’s because I am. So many good, hard working people are being denied the right to work because of the hard times they have fallen upon. With so many people in financial trouble, please tell me who’s getting hired.
I like so many others lost my job some time ago. Mine is a particularly touchy area of the gaming/casino business. I pulled and counted all the money form the gaming floor. My last job was a route operater supervisor where I counted, audited and tranported as well as deposited million of dollars in cash every week without supervision. In five years I never lost or stole a dime but when I lost my job due to an illness, I went broke after my savings were depleted. Ok, I lost my house and I owe credit cards and a few outstanding bills. The point is my credit is very bad now. I can no longer get a job in the industry because of my credit even though for years I did a great job. So what is it coming to? The credit card companies just want their money (rightfully so) but are hindering me from getting a job to pay what I owe. It will be interesting to find out what happens over the next few years. Wasn’t it partly the greed of these banks that brought on most of this sick economy to begin with? I wish everyone in a similar situation as me good luck. If I do get another supervisory job, I will be ready to listen to an explanation of why the applicants credit is bad and take it into consideration
My story is very similar to Fitzgerald’s, so I won’t repeat it. I disagree totally with Jason. It is not right to judge a person based solely on their credit report. I worked for two failed companies in five years. I had worked for one of them for EIGHT years. I was loyal and hard working. I was trusted with ALL of the bank accounts and never stole anything. I even had access to the owner’s bank accounts because they trusted me so much to be confidential and honest. I had no control over losing that job; the company closed it’s doors. I made the mistake of being loyal to the end because I had known the the owners for so long and felt obligated. It took me six months to find a job and my credit was destroyed. Before that, I had perfect credit. Eight months ago, I was laid off again from yet another failed company (Countrywide). I certainly had no control over that one. The other day, I got an offer for my dream job. Dream company, dream team, dream salary. The offer was rescinded because of the credit problems I had in 2004. I had cleared 8 of 12 delinquent accounts but that wasn’t good enough. Doesn’t my effort to clear up the problems, even though they were 5-6 years old say something about my character? I didn’t file for bankruptcy but I should have. It would have been over three years old by now, and I probably would have passed the credit check. I have been hard working, sacrificial, and contributed with all my energy to every job I’ve ever had. I’ve been promoted, given raises and bonuses and the highest scores on my evaluations. But that doesn’t matter because I have credit issues that date back six years, so I can’t get a job. You cannot determine what kind of an employee a person will be by checking their credit report. I am living proof. Companies need to find better ways to evaluate people because they are missing out on very hard working productive people and those are the people that make money for a company.
I live in the uk, and this is a growing concern over here, i have always worked in a sector that involves cash handling and taking payments, which due to being made redundant ended last year. I applied for a position in the same sector and was offered a position. two days later the offer was withrawn, due to a credit check, which due to me loosing my job resulted in me loosing my home of twelve years. this has got to stop, i hope that they pass this bill, then maybe good honest employee’s can get their life back on track and not be treated as outcasts in society.
If credit checks work for employers, then perhaps it is time that employees start using them also. You should run a credit check on any company you apply for a job at, and on all its employees whom you might work with. While it is unfortunate that all these credit checks are much more likely to turn up credit problems than the one check on you, you must do what you must to protect yourself. Working at a job with bad people is a terrible experience and should be avoided.
I recently had a job interview with a bank in Missouri for a technical writing position (would not handle nor have access to any money). The interviewer and I got on very well. He told me during our interview that I was by far the most qualified for the position, but he had already scheduled meetings with two other applicants. He said that unless one of them “blew his socks off,” he would be calling me the next week to offer me a job. We even talked about salary since he said he was pretty sure I was the most qualified for the job and he wanted to make sure that I would be willing to work for the bank at the salary they offered. He had asked me before our interview to fill out a form that would allow their HR department to run a credit check on me. I was a little uncomfortable about the form asking me for my birthdate (I’m well over 50), but filled it out and sent it back. At the end of our interview, which lasted over 2 hours, the person told me that the credit check was just a formality and to expect a call from him the following week.
When he called the following week, he sounded miserable. He said that there were a “couple of questions” about my credit report. Turned out there was just one. A small department store account that had gone past 30 days due to mailing errors when I moved from one state to another. The fellow sounded relieved when I told him why this had occurred, said he personally thought it was wrong to use credit reports to assess potential employees, and asked me to write a note explaining why this had happened and send it to HR. He said that once I’d done that, he would be able to call me and make me an offer.
It’s been almost two weeks now and no phone call, no email, no nothing. I feel certain that I’ve been denied this job either because of this one glitch (which occurred, by the way, at a time when I was not only moving but also mourning the death of my fiance) or my age. Everything in my conversations with this fellow indicated that I was better qualified for the position than any other applicants.
As I wrote in my note to the HR department, btw, I paid all late-payment fees, never lost my credit card, still have it and use it, and the department store has increased my credit limit since this incident — plus I’m one of their “preferred” credit customers.
To me, this is ridiculous and discriminatory. If employers are going to be allowed to use credit reports in their assessments of employees, then there need to be some “rules” about how and what they can use so people stop wasting their time applying for jobs where they won’t be hired and also so companies can’t use this to gain information (such as birthdates) that they would not be entitled to ask for prior to employment.
70+ Million Americans Suffered “Bad Credit” (Previous to July ’09) long before the full economic collapse – that’s more than 1/3 of the entire population between 20 and 75 years old
379,000 Bankruptcies Filed Q1, 2010, (17 percent increase over Q1, 2009 during a year in a year which they soared upward by 32%)
35% Increase in Foreclosures and a 16% Increase in Foreclosure Notices Q1, 2010 (over Q1, 2009) and 1 in every 4 Homes in America are at least 10+ % “underwater.”
In survey after survey, including a recent MSNBC survey, more than 90 percent of Americans say that workplace discrimination based upon someone’s personal credit report is wrong and should be illegal. ZERO statistical evidence exists to tie bad credit reports to fraud! It’s already illegal in 3 states and HR3149: The Equal Employment for All Act would make it illegal in every state, but most Americans don’t even know the legislation exists. Please support the overwhelming will of the people and the rights of highly qualified American workers to compete on a level playing field during this horrible economic disaster. Join our FB PAG at: http://groups.to/h.r.3149 or shoot us an e-mail at hr3149@hotmail.com with”sign me up” in the subject line.