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.
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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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