The unholy alliance of employment and credit history

job applicant and credit history

job applicant and credit historyAt a time when unemployment rates are high, employers are sending another blow to job applicants by pulling credit reports to weed out job seekers.

More employers are using credit history as a determinant in hiring employees.

It seems unthinkable that an enthusiastic, eager job seeker could be denied employment based on credit history.

But, according to a survey by the Society for Human Resource Management, 60% of employers are using credit checks when filling at least some of their openings.

Only 35% reported checking credit in a 2003 survey, and only about 13% did so 1996.

The irony is that without a steady paycheck the likelihood of defaulting on credit obligations increases. If it comes down to a choice of putting food on the table for your family or paying a car note, the choice is obvious.

Additionally, unemployed consumers often rely upon credit cards for basic necessities such as food and paying utilities. They might be late in paying bills or; even worse, miss paying bills altogether.

In light of the high unemployment rate, screening applicants and weeding them out based upon credit history seems counterproductive. Many employers seem to think there is a correlation between responsible employees and personal finance management.

Unfortunately this belief does not take into account the numerous problems with inaccurate credit reporting, mistakes in credit reports, identity theft and fraud. More importantly, employers who screen job applicants by pulling credit reports often do not see the entire picture.

Many consumers get behind on credit obligations due to illness, under-employment (i.e. decreased hours), or even divorce. The potential for job seekers to be unfairly judged based upon circumstances beyond their control increases when credit reports are pulled. In many instances the job duties have absolutely nothing to do with financial responsibility and creditworthiness.

Three states have taken action against this practice. Hawaii, Oregon and Washington have passed legislation to prevent employers from accessing credit history unless they can show the relevancy of an applicant’s credit history and the duties of the job.

Currently there are similar pending bills in Congress as well as 16 states having introduced bills which will limit an employer’s access to a job seeker’s credit history.

Credit reports are not character references. Many unemployed consumers can be trusted to perform their jobs well, even if they have less than perfect credit.


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