Stay outta my credit report!
Efforts are afoot to prohibit companies from pulling credit reports of most prospective hires.
Should an employer have access to your credit report when you’ve applied for a job? Is that really fair? What if you can’t pay your bills because you were laid off or had major medical bills?
More lawmakers think it’s not. At least 16 states are considering a ban on employer access to credit reports unless they're filling law enforcement jobs or those that involve handling lots of money. Hawaii and Washington state already have similar laws on the books. (A federal version was introduced but apparently is going nowhere in Congress.)
Credit reports can affect your access to credit and how much interest you’ll pay, and increasingly, whether you’ll be hired. A recent survey by the Society for Human Resources Management found that:
- 60% of employers said they run credit checks on at least some applicants, up from 42% in 2006. (It was 36% in 2004.)
- 13% do credit checks on all prospective hires.
Note: Your credit score and age are not included with the credit history provided to employers.
Employers say credit reports are an important part of the hiring process, particularly as more companies are reluctant to provide a reference -- good or bad -- for workers who have moved on.
Chris Miller, the president of FYI Screening Inc., outlined more arguments in a letter to the Maryland state House opposing a similar bill. His company provides background checks for employers.
- “Credit reports are integral to the hiring process because employers must determine the accuracy and completeness of a job application.”
- “Also, employers use credit reports to safeguard against internal theft that can be a result of employees who cannot meet their monthly financial obligations.”
Employers also note that they can’t pull your credit report unless you approve. And, they have to give you the report if its contents cost you the job.
On the other hand, supporters of the proposed laws say:
- People seeking jobs aren’t likely to deny a request for access to their credit report, no matter how bad it is. That would be seen as a red flag by employers.
- Employers have other ways to vet candidates, including reference checks and criminal histories. (This Privacy Rights Clearinghouse article has more about background checks.)
- Credit reports can contain errors. (Yet another reason to use AnnualCreditReport.com to periodically access your credit reports for free.)
A Eugene Register-Guard editorial supporting a bill in Oregon referred to a story state Rep. Val Hoyle, D-Eugene, told about a family in his district. Both parents -- they have five kids -- lost their jobs. The wife has since been treated for gastric cancer, and the debts are mounting. When the father applies for jobs, Hoyle said, “I don’t think that looking at his credit ... is going to determine whether or not he is going to work hard. He is going to work hard.”
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Fair or not, employers in most states can still examine your credit history when you apply for a job. What should you do if yours is less than good? MSN Money’s Liz Pulliam Weston shared this advice:
That's why, if you are asked to sign a paper allowing a potential employer to check your credit, (employment attorney Manesh K.) Rath recommends taking the opportunity to explain the circumstances to the potential employer, especially if the problems have been resolved, were the result of a mishap beyond your control or could be fixed simply by being employed again.
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