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