A Call To Abolish Employment Credit Checks

Back in the day when my credit was very, very bad and I didn’t have any real sense of urgency about doing something about it, per se, my mom would try to put the fear of god in me by saying that when I applied for jobs, prospective employers could looking up my credit and, seeing how irresponsible I was, decide not to hire me. This seemed (and seems!) both totally unfair and hardly believable.

According to a recent survey-based study from public policy org Demos (h/t Astra Taylor), employment credit checks are actually fairly common: 1 in 4 of unemployed people who were surveyed reported having their credit checked as part of a job application. Among the unemployed with ‘blemished’ credit histories, 1 in 7 has been informed they missed out on a job because of their credit.

Employment credit checks are legal under federal law. The Fair Credit Reporting Act (FCRA) permits employers to request credit reports on job applicants and existing employees.4 Under the statute, employers must first obtain written permission from the individual whose credit report they seek to review. Employers are also required to notify individuals before they take “adverse action” (in this case, failing to hire, promote or retain an employee) based in whole or in part on any information in the credit report. The employer is required to offer a copy of the credit report and a written summary of the consumer’s rights along with this notification. After providing job applicants with a short period of time (typically three to five business days) to identify and begin disputing any errors in their credit report, employers may then take action based on the report and must once again notify the job applicant.

I’ve never been informed that a prospective employer was going to run a credit check on me (MIKE DANG???), so I suppose that means it hasn’t happened. But, as Demos points out, notification can often be lost in the flurry of application paperwork, and refusing a credit check can cost you a job as well.

As the study concludes:

Our research supports the contention that employment credit checks can create an untenable catch-22 for jobseekers: they are unable to secure a job because of damaged credit and unable to escape debt and improve their credit because they cannot find work. But the fundamental unfairness of the situation goes a step further: we find that poor credit history is associated with factors such as race, unemployment status, parenting responsibilities, and medical debt that have not been justified as reasons to make hiring decisions and – in the case of racial discrimination in hiring – are illegal in the United States. Accordingly, we conclude that credit history illegitimately obstructs access to employment. Many Americans seem to agree: when we asked our sample of low- and middle-income workers with credit card debt whether employers should be able to look at a job applicant’s credit report, 75 percent said no.

Photo: Adam Baker

---
---
---
---
---

11 Comments / Post A Comment

SterlingCooper05 (#2,529)

My employer completes background checks for criminal, education, and credit after a contingent offer is made. Not once has the offer been revoked due to credit history. It is more of sanity check than anything.

andnowlights (#2,902)

So when I started at a new company 1.5 years ago, they mentioned they maybe would look at my credit history (I knew they would pull my criminal history since it was in healthcare admin). Totally assumed they wouldn’t because… I don’t know, I just assumed they wouldn’t (I didn’t think this was actually something people did). Well, I pulled up my 3 free credit reports last week and they HAD checked! Color me surprised (and relieved my credit score is super good).

garli (#4,150)

If you work with proprietary or classified information this makes sense because they want to make sure you’re hard to bribe.

garli (#4,150)

@Meaghan O’Connell Right? I don’t love it either but maybe it’s a fair point? I don’t know!

ThatJenn (#916)

@garli Yup. My mom’s security clearance can even be affected by my dealings – if I were, say, in millions of dollars of gambling debt or something, she could totally lose her clearance because she might be swayed to sell government secrets to bail me out of my troubles, because she loves me that much.

(P.S. That was all purely theoretical, g-men… the only debt I have over $2,000 is a car loan, and the lender is my mom herself.)

garli (#4,150)

@ThatJenn Oh yeah they care so much about your family too. Have you seen the totally insane form you need to fill out to start the process?

ThatJenn (#916)

@garli I haven’t, since everyone in my family has had their clearances for so many years, but I recently had someone fly in to interview me at work about my best friend from high school who I haven’t seen in five years (for her new clearance). It was intense!

pixiesuperhero (#3,951)

What is the deal recently with surprise sound-playing ads here that can’t be muted? I can’t even find them on the page most of the time. Just phantom ad soundtrack. The only reason I even know it’s you is because of the handy new chrome feature that shows you which tab is responsible for the audio you’re hearing. Anyway it’s very annoying!

Beaks (#3,488)

@pixiesuperhero I have my plugins (including flash) set to click to play- it adds an extra step to youtube, but it really cuts down on animated/ video ads (without the total cut to ad revenues that something like adblock does) In Chrome it’s Settings-Privacy-Content Settings.

needsmoresalt (#3,501)

I think I’ve had employers run credit checks on me. I’ve definitely had employers ask me for permission/information to run what seem like extensive background checks. It used to make me nervous (because my credit is the worst), but now I just let them and figure I would rather take the chance of feeling slightly embarrassed about not getting a job because of terrible credit than psych myself out of even applying. I think credit checks are one of those things where there are so many prospective employees that employers feel like they can be super-picky.

Comments are closed!