Should Employers Use Credit Reports to Screen Job Candidates?

by Joe Plemon on October 13, 2009

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. Employers, often winnowing a big pool of job applicants in days of nearly 10 percent unemployment, view the credit check as a valuable tool for assessing someone’s judgment.
Creative Commons License photo credit: TheTruthAbout…

In the midst of a national recession and rising unemployment, many who are seeking to dig themselves out of their financial woes are being hit with a double whammy: potential employers are disqualifying them from employment because of low credit scores. These employers are using a number (credit score) as a rationale to rule out hiring people who may be the very best candidates for employment. Their logic is that if people can’t stay current on paying their bills, then they would not be dependable employees. This may be true in some cases, but employers should also consider that the people who have been hurt the most by job losses are the most motivated to get back on their feet again. This motivation could make them the very best candidates.

If Congressman Steve Cohen (D-Tenn), has his way, this practice will come to a halt. Cohen, who is sponsoring a bill that would prohibit employers from seeing the credit reports of most job applicants, says

“At a time when people are struggling to find jobs credit checks should not be used as a basis to deny employment to otherwise qualified candidates.”

Cohen’s bill would include exceptions for jobs that involve money or require national-security clearances.

Of course not everyone agrees with Cohen. Jason Morris, president of a company that runs background checks for businesses, says employers should have access to the data.

“If an employer is on the fence about an applicant, credit reports can be valuable – particularly if the job includes fiduciary responsibilities.”

I hope that Cohen’s bill passes. It includes the obvious exclusions and will protect job applicants from being unfairly screened. And because, according to some estimates, 33% of all credit reports have serious errors in them, the legislation will prevent many job hunters from being penalized unfairly. Cohen’s bill, by denying employers access to credit reports, would push them to do what they should do: make hiring decisions by doing the hard work of comparing resumes, contacting references, talking to former employers and performing face to face interviews.

Much of our society has an unhealthy infatuation with the credit score. Lenders simply look at a number instead of doing manual underwriting. Auto insurance companies, instead of basing our rates solely on our driving record and accident history, use our credit scores. And, of course, employers screen prospective employees through the lens of their credit reports. A change is in order to force us to treat people as individuals instead of numbers. Cohen’s bill is a step in the right direction.

Note:  the quotes from this post came from a Parade magazine article found at http://www.parade.com/news/intelligence-report/archive/091004-can-bad-credit-keep-you-from-being-hired.html

Check out this article and vote on Parade’s poll question, “Should your credit history affect your ability to get hired?” At last check, the poll was running 7% YES and 93% NO.

Readers: do you agree or disagree? Have you ever been bumped from possible employment because of your credit history?

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{ 7 comments… read them below or add one }

Korwin October 15, 2009 at 5:00 pm

I froze my credit so nobody can have access unless I already have credit through them. I have great credit but don’t want an employer looking through it. That is about as crazy as them looking through medical records to decide on who to employee.

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FB @ FabulouslyBroke.com October 18, 2009 at 6:28 pm

I had my credit report pulled when I started at my first job

It said I had $60,000 in student loans on there, but I suppose that passed muster, because I got the job.

I wonder what would have happened if I had accidentally missed a couple of payments. It wouldn’t mean that I am a BAD employee, just that I am neglectful of my finances.

Some people who are great employees, neat, tidy, organized at work… are total pigs at home in terms of their organization and schedules.

There’s a work persona and a personal one.

The two are related, but only slightly.

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Peter October 21, 2009 at 9:50 am

I can certainly understand to some degree why employers would do it – in order to find people who would fit that “responsible employees” mold, however, especially in this day and age I can also see how a lot of normally very responsible people would have some dings on their credit. We have what is quickly approaching 10% unemployment, and people who haven’t saved up a large emergency fund might be stretched thin and having to miss payments.

So while I understand why companies do it, I’m all for keeping companies from unfairly screening people – and keeping their credit info private.

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Paul Conley October 21, 2009 at 12:42 pm

Joe,
I, too, hope Cohen’s bill passes.
Until then, I’ll hope that the employers who use credit reports to screen potential employees do so intelligently.
There is a difference between someone with years and years of bad credit, and someone who began missing payments in this recent recession. There’s also a difference between people who makes mistakes with their money — and there are millions of us — and those who would make mistakes with other people’s money.
Being bad at personal finance — particularly in this economy — doesn’t mean you’ll be a bad employee.
And I trust that most businesses understand that.

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FinancialBondage May 22, 2010 at 1:16 pm

seems unfair to me. Just because I did dumb stuff with money does not mean I will be a bad employee. Like many people in our culture, no one taught me the money thing.

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Kathrine@Accountancy Training Course July 18, 2011 at 5:33 am

There is a difference between people who make mistakes with their money – and there are millions of us – and those who make mistakes with other people’s money.

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Helen@Custom Printed Balloons August 10, 2011 at 12:53 am

I can see how a lot of people tend to be very responsible would have some bumps in credit.and someone who started to make payments is lacking in this recession.

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