Are Credit checks before they hire you fair in the current economy?

Scenario: Harry (name changed) ran a successful business before the downturn in the economy caught up with him. He was faced with a situation of a bunch of dues ranging from overblown credit card dues to home mortgage to car payments, etc.

Next, Harry started looking for a job. A graduate with multiple skills; all he needed was to combine his transferable skills and finding a job was a non issue – so he thought.

Then came the road block - his credit score stopped him from getting some jobs that were within his reach. Some of his potential employers checked his credit reports and based on his current status would not consider him. Does a bad credit score really make him a bad employee?

A credit check was primarily instituted to insure one’s ability and track record in repaying loans. It was not meant to be involved in any manner whatsoever in one’s employment search.

That’s the question being explored  by the Equal Employment Opportunity Commission, the federal agency that enforces laws that prohibit discrimination against workers based on race, religion, gender, age, or disability.

**“SHRM believes there is a compelling public interest in ensuring that employers can assess the skills, abilities and work habits of potential hires,” Christine Walters, a human resource professional and lawyer, told the EEOC. She appeared before the October meeting of the commission on behalf of the 250,000-member SHRM.

SHRM’s latest comments on the practice of conducting credit investigations for some job applicants come in response to an idea that was floated at an Oct. 20, 2010, EEOC hearing. It was suggested that the answers to these three questions from a former employer would obviate the need for credit checks:

  1. Did the employee perform adequately?
  2. Did you have any concerns about the employee’s integrity or reliability?
  3. Would you re-hire this employee?

SHRM said that using just these three questions would raise “practical and legal issues.”

In a Dec. 3, 2010 letter from the SHRM Director of Government Affairs Michael P. Aitken said, “asking previous employers the three suggested questions is not a realistic substitute for employer use of other available information, including credit reports.”

*In defending employers’ use of credit checks as part of the hiring process, Eric Rosenberg of the TransUnion credit bureau paints a sobering picture. Retailers lose more than $30 billion a year because of employee theft, he says. Workplace violence costs employers $55 million a year in lost wages. A third of employees provide bogus information on their résumés.

Even Eric Rosenberg, admitted at a legislative hearing in Oregon: “At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”

As a friend mentioned – most of the folks on Wall Street had a great credit score; what happened? Mere financial challenge of an individual should not allow one to lay aspersions on one’s integrity. There is no correlation between the two.

For most jobs, your credit score is not an important qualification. That's why states are starting to crack down on companies who use credit checks to screen applicants. Hawaii, Illinois, Oregon and Washington have all banned the practice. I understand 15 states are moving aggressively for a similar ban. Probably, this is the right time for you to write to your Representatives and ask them to ban such a check in your state.

It is important for a ban of this practice at a federal level to insure wrongful discrimination. Each day means many jobs lost for persons already hit by a bad economy.

Source: * NY Times **  SHRM Online     

 Please conduct further research for this and other career  related information                                   

"WHAT NEXT" is provided by Ramesh Anand, President, American Personnel Resources LLC.                

He can be contacted at: E-mail: 


Views: 113

Comment by Jason Monastra on March 29, 2011 at 4:36pm

I understand the position as you describe it, however it would be naive to believe there is no correlation at all between the ability for one to manage their finances - and therefore their ability to manage certain aspects of their professional position.   Lets consider some of the more sensitive positions - such as corporate security, government positions requiring clearance, etc.  Would you like someone in those roles who has credit issues due to a gambling habit that could compromise their integrity if put in a certain position.


Do not misread, in a good deal of cases I believe their is little to no correlation at all.  However when and how the screening tool is used is critical and one that I think needs to be measured in a more distinct manner.  Certain positions where it directly correlates to the handling of finances, the access to confidential information, or something of the like makes sense.  But for the average position, I believe it is not needed.


More importantly, the reason for the credit score must be weighed.  One must be able to use cognitive ability to read through the score and see the reason behind it.  If someone gets very ill, bad accident, etc. and has extreme medical bills - does that say anything about him/her?  Absolutely not.  More closely, it says nothing about their credit at all.  I believe medical claims should be excluded from credit reports in their entirety since they have no bearing what so ever on the person involved.


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