Posted by Mark in Yesterday we asked our readers and twitter friends one question : “Should credit check be part of the employment process? “ The results were clearly in favor of people who said credit checks shouldn’t be a deciding factor when it comes to offering a job.
Employers routinely use credit report as a critical tool to decide whether or not an applicant is qualified for a job. Although mostly government agencies seem to keep tab on applicant’s credit history, private employers seem to have been quick to adopt this model as well.
With economic downturn and lay offs, it certainly is understandable that most have failed to make payments on time. The other day I was reading an article on how one person who had a job offer on the table was turned down after the employer found out his credit history wasn’t all that great. The reason for change in decision was due to his credit history which made him a risk in the long run. Does this mean not paying your bills on time and having a bad credit history show that you are a risk to the company? This is a controversial question with many views and opinion. Personally, I feel like it gives the employer a peek into how responsible a person can be in their job, but not an overall picture.
According to a survey conducted by Society for Human Resource Management, about 35% of the employers pulled credit history of the current or potential employees as compared to 19% in 1996. This clearly shows that more employers are interested in your credit history than they were before. This is not an indication that credit history alone can be a factor in deciding whether or not you should be able to get the job. It has, however, become an increasing trend among employers to use credit checks along with background checks when hiring a potential employee or considering a promotion.
When applying for a job, potential employers can’t run credit checks without your permission. The Fair Credit Reporting Act (FRCA) requires that an employer get a written permission before they decide to run a background check on you. Be aware though, when you give permission to run a background check, you are allowing them to run a credit check as well. Some job applicants are surprised when they find out a credit check was done when they had granted permission for just the background check. When you sign on the job application that the employer may run background check on you, you are giving them the right to peek into your financial past as well. So whether or not your credit report is pulled solely depends on the employer and the position you are applying for.
Although bad credit history can cost you a job, an employer is required by law to let you know if it was the deciding factor. However, there are companies that may say other candidates were far qualified for the position than you were. So there is certainly loopholes in the law as well. Bankruptcy is an exception though. If you have filed for bankruptcy, an employer can’t discriminate you against bankruptcy cause it is clear that you were unable to pay the bills and have been trying to take control of the situation by opting another way out. But again, the employer can point to the credit history and say your credit was the deciding factor without mentioning anything about the bankruptcy itself, so it all depends on how the company handles the information and breaks it to you. However, if they cite in the denial letter that bankruptcy was the deciding factor, it is discrimination and you can go after the employer.
All the legalities surrounding credit check and employment aside, it is good to keep tab on your credit history. We all tend to miss a couple payments here and there. There are days when a bill is due on the 15th and we get paid on the 20th so the payment is a bit late. No big deal. It happens and most employers aren’t looking at these petty financial holes. When they run credit checks to consider whether or not to hire you based on your credit history, they are trying to see if there are any serious issues. If your credit history shows evictions, repossessions, foreclosure and such, then it is possible that you won’t get the job. An employer might be willing to keep a blind eye to that unless you are applying for a banking job or a finance related job. Credit checks also allows employers to compare application form and credit history side by side as a way to verify the information you provided in the job application. If you lie in your job application, that’s a red flag for sure.
Personally, I am not against running credit checks on an applicant. It gives employers a piece of mind and an overview of how the employee can be an asset to the company. Like I said before, it usually helps employers to verify the information that is on the job application form. Should your financial record be the sole factor in the hiring process? Absolutely not. But a credit report carries more than your financial record and it certainly gives an employer a better picture.
Whether we like it or not, employers are going to use credit reports as a way to decide whether or not someone is eligible. The best we can do is to keep it clean. If for some reason there are flaws in your credit report, make sure you try to fix them. It might take time but good opportunities don’t come by everyday either. If you ever get turned down due to bad credit history, keep your chin up and keep trying.
That’s my take on credit check and its importance in the employment process? What’s your take?
Find out what your rights are as a job seeker by following this link : Employment Background Checks
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I don’t think it’s fair at all that my credit report decides if an employer should hire me or not. I just started getting into a debt management program and being “punished” for it by having an potential employer not hire me is not right in my opinion.
Look at it this way, I’m trying to get back on my feet financial wise and an employer will not hire me because of that? Sorry, that is so wrong!
@Amy : I totally agree with what you are saying. Like I said in the post, I think credit check should be a tool to analyze and get a peek into an applicant rather than it being the only tool, which it usually isn’t. Unless you are applying for banking jobs or jobs that require you to handle money, etc, it’s pretty unusual that someone won’t be offered a job if they are eligible. However, every employer is different and looking at the rate, it seems like credit check on job applicants are here to stay.
A credit Report should not even be considered. It is private information and does not really reflect job performance. For a married couple the credit rating might not even be a valid reflection upon the job seeker – it could more accurately reflect poor habits for the spouse or ex-spouse.
@Dotty : I agree with your argument. But like I said it sort of allows employers to verify the information on the job application form itself. Information such as past jobs, locations and stuff like that and I am sure most employers use it for that purpose. But if you are applying for a job in a financial sector, I am sure it can be a red flag right away.
And I agree about the married couples scenario too. I think there needs to be tougher regulations so a person isn’t penalized for the actions of their spouse or something along that line.
Thanks for taking the time to express your views.
I do not think that an applicants credit report should be pulled at all unless they are applying for a job that handles money. You say that it gives employers a peek into what kind of person you are or verifying your information like addresses, etc. They can get that information by calling previous employers and checking your references.
A credit report is very private and coming from someone who’s credit is in the toilet, it does not mean that you are a bad person, worker or would be a liability to a company. There are many reasons why persons credits’ goes bad.
Looking at the current economic times, you can find many reasons. i.e. If a parent has to choose between paying a credit card bill and buying food to feed their family with what little money they have to survive on after getting laid off, guess what, not a hard decision to make.
@Stepahine : Thanks! Once again I am not all for it but am not all against it either. As I have said in my previous comment, there need to be tougher regulations that guard the fine line. However, credit history does and can give a bit more information besides financial history alone.
In regards to paying bills and feeding the family, of course I am willing to lose my house, shred the bills in pieces and buy two loaves of bread while living under a tree.
Like everything else in life, there are two sides to every story. Employers should not have access to financial records unless the job you are applying for gives you access to the company’s bank accounts. Things sometimes happen that are beyond a person’s control. It has nothing to do with whether or not they are responsible. Believe it or not, creditors have been know to put someone into “wrack and ruin” because of their aggressive collection practices. Choosing to disqualify an applicant based on their credit history is (almost always) unfair (IMO).
I can understand an employer doing a check, but I don’t think it should be a hiring factor. This has been a problem for me. How?
1. At the prestigious college that I attended, there were students working in the Financial Aid dept. who did this to me as well as a number of other students.
2. My relatives obtained my social security number (and not due to negligence on my part) and totally destroyed my credit!
Btw. People such as my relatives steal other people’s identities and create a “cover” for themselves making it seem as if they have a clean record. Seriously. You’d be surprised at the number people who do this. Given the identity thefts and people who falsify records these days and those who have an inside track it’s not such a good idea.
Personally I’m against the idea of employers using credit reports to determine job eligibility.
I think if they run a criminal background check this makes more sense to determine ones character, honesty and so on.
The reason I don’t think credit should be used in determining employment is because sometimes things happen that are outside ones control. i.e. A very hard working, honest, responsible person may suddenly lose their job and become temporarily unemployed and may not be able to pay their bills for this reason. So I think it’s pretty unfair to penalize this person from future job opportunities.
[...] Is Bad Credit Hurting Your Chances Of Landing a Good Job Posted by root 6 minutes ago (http://applicant.com) Scratch that we just saw your credit report all the legalities surrounding credit check and employment aside it is good to keep tab on as i have said in my previous comment there need to be tougher regulations that guard the fine line powered by wordpress Discuss | Bury | News | Is Bad Credit Hurting Your Chances Of Landing a Good Job [...]
This is crap! I been out of work for two years, I applied for a Job at Jc Penny’s and they never contacted me, but they told my brother who works there that they would never hire me cause of my credit and they said my character is not good, though they never met me….And the job I applied for was to sort and fold clothes…….I am an excellent worker and will probably end up dead soon, since I can’t make it…..
Also what really pisses me off, if you are employed it is a policy by many Employers to routinely check employees credit and if they find a mark they find a way to make you quit as they do not want you as an employee and don’t want to promote you, so getting rid of you is the easiest way. I believe that is why they starting using tactics on me to make me quit even though I was always praised as one of the best employees at the store….
The first to employ this policy was Wal-Mart and as you know if it is a policy used by Wal-Mart then every company follows their example.
Can an employer run a credit report on you months AFTER you are laid off? One of my previous employers ran a credit check on me 4 months after they laid me off…..isn’t that wrong?
In order for them to legally run a credit or background check on you, they need a signed authorization from you. Sometimes companies indicate on the application or disclosure form that they may run them at some point(s) throughout your employment and if this is stated they may run it again while you are employed. If you find they have done it after you were no longer employed there, they would most definitely be in violation of your rights under the FCRA. If you want to read your rights and how you might file against them, look up info online by searching for my rights under the fair credit reporting act
Good luck
I cannot get a job due to credit. I have a BA and cannot get hired anywhere! I mean anywhere! Ex cons are being hired before me , seriously! I cannot support my family and it is embarrassing.
I totally agree. Ex Cons get hired and if you are going to use a credit Report to judge a person give them a place to explain the same as you ask to explain if you have any felony charges.
A criminal record is by choice Bad Credit can be an unfortunate circumstance( medical,divorce,layoff)
It makes no sense and should be illegal.
Criminal background checks are one thing.
A credit check is another. People have no control over credit if something goes wrong.
Crimes as states in a previous post are most times intentional unless you are falsely accused of something.
Therefore, credit scores and records say nothing about a persons character or what type of asset they will be to a company.
This rule is the dumbest thing mankind has done in American Society and needs to be banned!
This is what happens when Narcissists and Psychopaths are allowed to make laws!
We need “CHANGE” in the credit policy involving employment and in other areas too, it’s ridiculous. That is a private matter that employers have no business in.
You can have perfect credit, then become an identity theft victim or lose a job, get sick or injured. What the heck do they think. Everything is always perfect at all times when it comes to money. Escpecially in todays world.
It’s socialist/communist control in the making!
How is a worker supposed to get a chance to clean it up if they can’t make decent money to get back above water again!
It’s called “commonsense”. Our society seems to have lost it somewhere!
BAN Employment credit checks NOW!
It is creating 21 century financial slavery!
thank you very much for the post. I seem to have been lost with all the different terms that are out there for people with debt problems. Yours is the best one of explaining each in laymen terms. Thank you for taking the time to do this.
This is an interesting perspective:) Very nice reading. Thanks for sharing this great article!
thx for the awesome tutorial.keep them coming..
This is something that needs to be done away with. If credit is an indicator for job performance, then please explain scandals such as EnRon, MCI, all the way to Bell & Beckwith in the 80s. The people committing these crimes had excellent credit and so did their co-conspirators. It is understandable for the financial services industry to be concerned about credit (securities, stock brokers,…). But others using credit to withhold employment from otherwise able-bodied and capable people, are only contributing to the problem. Good things happen to bad people, just as bad things happen to good people. It’s called life.
Over 85% of info in the big three bureaus contains gross inaccuracies; re-aged listings, incorrect debt amounts, etc. etc.
What does that say about the effectiveness of credit reports? If the employee is in a position of trust with money – YES! Otherwise, it is not a true litmus test of character.
[...] You Are Hired! Scratch That, We Just Saw Your Credit Report [...]
well, personally i do not think that a credit report should be a factor when hiring someone. even when handling money, it should not be a factor. i do not have the best credit but that is because i fell on hard times, my husband was laid off, my grandma died and i had to work for a little of nothing to keep up the house utilities. when you have kids and a house to maintain lights, gas and water trumps a credit card. but that does not mean that i would ever steal from someone… i have been working around money since the age of 15, doing cash deposits and bank runs… i have never even thought about taking it! a person’s credit does not have anything to do with their character… that is just as bad as racism… judging a person by what you think you know about them.
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I do not feel that credit is an accurate measure of a persons character. For example, half of the marriages end in divorce. We all know the financial detriment that this could cause a person. Add to that a single parent who is a sole provider of young children and you know it would be difficult to maintain ideal credit.
We also look at the numerous cases of corporate greed where people such of Madoff engage in criminal activity to deceive people out of millions. I would venture to think that he had perfect credit when he was hired. What is more important is what that person is doing to keep that perfect credit.
I know of women who use men and use all kind other other unethical measures to stay ahead and live a high classed life; however, a decent, respectible person is looked down on in this society as a criminal if he/she has bad credit.
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