Can Poor Credit Cost You a Job?

            You have fallen behind on your bills thanks to a long stint of unemployment and now you are unable to get a job because you have fallen behind on your bills. Many people are finding themselves in just this dilemma these days as more and more employers are using credit checks to screen job applicants. In 2006, 43% of companies ran credit checks on some or all potential hires according to the Society for Human Resource Management. That was up from 25% in 1998.

            So why do employers run credit checks on potential employees? One reason is that negligent hiring lawsuits are on the rise. This is true especially in businesses where employees have access to customers' money or possessions, including the banking, property management, hotel, and home health care industries. The rationale is that people with big debts or other credit problems may be more likely to steal or commit fraud. Even if a job doesn't involve money, some employers are convinced that people who manage their credit well are better workers than those who don't.

            There are three things you should know if you are concerned about your credit history affecting your job prospects. The first is that an employer needs your permission in order to run a credit check. Failing to get your permission is a violation of the Fair Credit Reporting Act. Second, although other black marks can be used against you, a bankruptcy cannot.  Under 11 U.S.C. 525, employers are prohibited from discriminating against someone who has filed for bankruptcy. Third, if an employer uses credit information to deny an applicant a job, fire a current employee, rescind a job offer or cancel a promotion, federal law requires the employer to provide the worker with a copy of the report and an explanation of the worker's rights under the law.

            Many people don’t think it’s fair for employers to use credit reports to screen job applicants. In fact, Representative Steve Cohen of Tennessee has introduced H.R. 3149, which would prohibit the use of credit information in most employment decisions. The bill is currently in committee. Two states, Hawaii and Washington, already prohibit employers from using credit checks to screen job applicants.

            While I can understand that employers need to protect themselves, I sympathize with those who have lost jobs, homes and income due to circumstances beyond their control. Many people who have had good credit may no longer, and when they most need a job, it seems unfair to make a spotless credit history a requirement for employment.

Results of last week’s poll are in. One hundred percent of readers polled report that at least one senior in their family is or has been stressed by severe financial problems.

Please take a moment to vote in this week’s poll: Should employers be allowed to run credit checks as a way to screen job applicants? The poll is located at the bottom of the right hand column.

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