Right now it is tough enough to find a job! Add to that the fact that employers are increasingly checking applicant’s credit when deciding who to hire or even who to promote.
Approximately 60% of employers are now checking credit on applicants as reported by the Society for Human Resources Management. That is a huge increase from 10 years back. Not great timing for this to be happening with our economy in the tank and for too many (millions, in fact) have been unable to keep up with mortgages and other debt repayment for reasons beyond their control. Credit in America has suffered greatly!
Even those who have managed to keep up with their payments have still seen their credit scores decline due to banks cutting credit limits thereby increasing the ratio of debt to credit limit. The problems have become so prevalent that Fair Isaac recently reported that approximately 20% of Americans have credit scores below 600. (FICO scores range from 300-850).
When an employer looks at your credit report, they are viewing not only financial information about you but also scads of personal information.
- Public records, i.e. judgments, tax liens, bankruptcy, delinquent child support
- Every creditor you owe and prior creditors and debt
- Balances and payments on all current debt
- Closed accounts, charge-offs and collections
Employers have been repeatedly questioned as to the validity of doing a credit check on a potential applicant. Their position is something along the lines of; if people have managed their financial affairs this will carry over into the work place. And that a credit report may show something of a person’s character that does not come out in an interview. However; what if the reason for the poor credit was beyond the applicant’s control, like a major health catastrophe, or any other reason?
Certainly no employer would want to hire an employee that might steal money from a company. And yet most employees won’t be handling either customer or company monies. Credit checks, in my opinion, are not an accurate screening tool.
Currently there are three states which won’t allow employment credit checks; Hawaii, Oregon and Washington. There are many other states looking to do the same exact thing. There is even federal legislation being considered to stop this practice.
As you might have gathered, I am no supporter of using credit reports in the hiring process. In a Great Recession like now, why do we need to make it increasingly difficult to get a job?
Has bad credit cost you a job or promotion? Maybe someone you know? Let us know your thoughts or share your story.