A large number of employers examine the credit history of potential applicants. The rationale? People with big debt and/or credit problems can’t handle their own funds; therefore they’re more likely to steal or commit fraud.
People that manage their credit are better workers? What? Employers should bear in mind that there are other reasons for individuals having bad credit such as divorce, personal bankruptcies resulting from medical crisis, student loans, family death, identity theft, etc. Even simply the loss of income while between jobs. Many of these events occur normally which negatively impact the candidate's finances and therefore credit ranking.
As employers we need to recognize that in today’s struggling economy people have lost their homes, their cars, and can not meet the financial obligations that, prior to their job loss, weren’t a problem!
For the employee candidate it’s a Catch-22. They’ve lost their job. Because they’ve lost their job, they’ve fallen behind on their bills. Now there’s a potential that they can’t get a new job because they’ve fallen behind on their bills and have a poor credit report.
Validex Employment Screening Services states “A candidate’s credit history is often a reflection of his or her current financial habits and, therefore, can be valuable information in hiring for positions requiring financial responsibility or aptitude. This information gives you insight into an applicant’s tendency to meet financial obligations and his or her current financial pressures. The way people handle their own funds is often a reflection of how they will handle company financial responsibilities and assignments.” This is verbatim from their website. How accurate is the statement?
While a credit check provides the prospective employer with information about the candidate's credit score, payment history and other financial information, are they really an accurate portrayal of the candidate’s work ethic or trustworthiness?
My question: Are credit checks an accurate predictor of job performance? There is nothing to support the validity of the claims that individuals with poor credit are poor performers.
The Fair Credit Reporting Act requires companies to get a candidate’s consent before getting the credit report. If the candidate is not hired because of information in the credit report, the candidate has the right to see the report and be told how to get his/her own version of it. A credit check is helpful if the employee candidate is applying for a job in which he/she is handling cash or exercising financial discretion, as well as being entrusted with property of substantial value. Such investigation on behalf of the employer will allow the employer to avoid issues relating to negligent hiring. However, is the credit check necessary for positions other than those referenced above?
Prior to denying employment to the candidate, do you, the employer, allow the potential hire to have an opportunity to explain the circumstances of the debt? How, as an employer, can you conclude that the credit history has a negative impact on the candidate’s ability to perform the duties of the position?
The winds of change are blowing. Two states, Hawaii and Washington , now limit the use of credit histories in pre-employment screening. This hot topic is receiving increasing exposure as more and more Americans are impacted by the struggling economy.
Up for discussion is a 2009 bill in Congress - H.R. 3149 (Equal Employment for All Act). This national bill will bar employers from using credit reports in hiring or promotions. It will allow, however, the use of a consumer report in the following situations:
1. When the consumer applies for, or currently holds, employment that requires national security or FDIC clearance.
2. When the consumer applies for, or currently holds, employment with a state or local government agency which otherwise requires use of a consumer report.
3. When the consumer applies for, or currently holds, a supervisory, managerial, professional, or executive position at a financial institution.
4. Or where otherwise required by law.
A key highlight to the law is employers would be prohibited from asking applicants to voluntarily submit to credit checks.
On February 28, 2010, MSNB addressed this issue. “Bad credit sidelines some jobless workers.” It’s an article worth reading! http://www.msnbc.msn.com/id/35512038/ns/business-eye_on_the_economy//
Please chime in and let me know your thoughts!
My on-going thanks to Mrs. Emily McGowan for providing proof-reading services on this blog.
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