States ban job-seeker credit checks
As US unemployment remains high, several states are making it easier to find work -- even for those who have bad credit.
This post comes from AnnaMaria Andriotis at partner siteSmartMoney.
This month, California became the seventh state to prohibit companies from doing credit checks on certain applicants, and similar bills are pending in another 19 states. On the federal level, a bill that calls for a similar ban is awaiting review by a House subcommittee. The moves could be "a game changer for people negatively affected by this economy," says Persis Yu, staff attorney at the National Consumer Law Center.
The trend also has ramifications for employers, who for years have been permitted to review the credit histories of prospective workers. The assumption, experts say, is that a bad credit report might help flag poor work habits and decision-making -- and even general untrustworthiness.
Indeed, some 60% of employers report doing credit checks for some or all job candidates, according to the Society for Human Resource Management. Of those, more than 60% said they are unlikely to accept applicants with an outstanding judgment currently filed against them, while nearly half would likely pass on those with accounts in debt collection.
Some research seems to back employers' fears: Nearly one-third of employees with self-reported credit problems engaged in "counterproductive work behavior," such as theft or accepting bribes, compared with about 18% of employees without financial problems, according to a 2008 academic study. Post continues below.
But consumer advocates say credit problems are more widespread now because of the struggling economy. Over the past two years, for instance, roughly 4.8 million homeowners have received a foreclosure notice, according to RealtyTrac. A foreclosure stays on a consumer's credit report for seven years.
Given that backdrop, some argue that employers should hire based on skills and qualifications and not credit histories. Those in the job market "have plenty of obstacles right now and should not have to try to defend the fact that they missed payments on bills," says Diane Rosenbaum, an Oregon state senator whose bill banning certain credit checks became law in 2010.
Case in point: Karen Selling, a dietetic technician in Shelton, Conn., says she and her husband, Christopher, a diesel mechanic, have each been on dozens of interviews over the past two years, but neither has been hired because of their credit histories. When their son got sick a few years ago, the Sellings racked up medical debt and fell behind on their mortgage. "Nobody is giving us a chance," she says.
In many states with the new laws, employers can still check the credit reports of applicants for certain white-collar jobs, such as positions in banking and law enforcement.
Under the Fair Credit Reporting Act, companies must get permission from applicants in writing to check their credit reports. For those with credit problems, it is better to explain what happened rather than deny permission, says John Ulzheimer, the president of consumer education at SmartCredit, a credit-monitoring site.
More on SmartMoney and MSN Money:
A thorough check on criminal background, employment references, and any other information submitted on the standard application are the only tools an employer needs to determine the risk level an applicant poses for ANY job. There are too many situations beyond a person's control that can cause credit problems. A spouses death, medical bills, and lay offs, not to mention the economy, are just a few examples of credit altering situations that are beyond one's control. But even if the bad credit is due to some poor PERSONAL financial choices, an individual's personal finances are just that. PERSONAL! Should exceptions to this be made for consideration of emp for certain positions? Absolutely not. Bad personal credit does not equal bad policeman or bad banker. Some of you are probably thinking, 'well obviously this commenter had bad credit'. You know what? You're right. I also worked as a site manager for a loan company, where I increased sales by 34% during that same time. My background is squeeky clean and would be welcome back with open arms from past employers.
Oh, and one last point. THOROUGH Criminal and employment background checks ALONE would most likely expose risk of "unproductive work behavior such as theft and bribes". Checking PERSONAL credit isn't going to tell you anything other than this person needs a job to pay debts they obviously can't pay without one.
The company you own or the company that put an imbecile like you in the position to do something as egregious as that doesn't deserve otherwise good people. If I were working for a moron like you and I found out what you were doing, I'd quit on the spot. It's jerks like you that give companies a bad name, and it's quite possible you've never been in a position where you couldn't put food on the table.
May you suddenly DROP DEAD.
With this information, how can any employer even rely on credit reports to reflect a person's accurate "trustworthiness?"
Do what I recommend. If they ever collected unemployment insurance, PASS... Find a better candidate.
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