IT Employment

EEOC looks at the practice of using credit rating checks on job applicants

The EEOC is concerned with employers who use job applicants' credit ratings as a screening tool.

Back in 2006, I wrote a blog about whether an individual's credit rating was indicative of his character. This was in response to the employer practice of running credit checks on job applicants. It ended up being a hotly debated topic among the readers.

Now the U.S. Equal Employment Opportunity Commission is meeting to discuss their own concerns about using job applicants' credit history as a screening tool.

According to a piece on seacoastonline.com, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit recently held a hearing on a bill that would amend the Fair Credit Reporting Act to prohibit employers, with certain exclusions, from using a consumer report for hiring or firing if the report contains information about creditworthiness, credit standing, or credit capacity.

"You simply cannot tell a person's character, integrity or how well they will perform their job by looking at their credit report," said Democratic Rep. Luis Gutierrez of Illinois, chairman of the committee. "The fact that someone has a credit report that is not superior to another job candidate does not make them less able to do the work at an office or a factory, nor does it make them more or less likely to steal from their employer."

And if you consider that with the current economy (and its subsequent home foreclosures, et al), a lot more people will be saddled with a bad credit rating. Seems like the pickin's will be slim for corporations if they use credit checks as a job screen.

About

Toni Bowers is Managing Editor of TechRepublic and is the award-winning blogger of the Career Management blog. She has edited newsletters, books, and web sites pertaining to software, IT career, and IT management issues.

30 comments
cmhatte
cmhatte

Debt happens. Especially with the economy right now. Hard working people are being laid off and it's effecting their ability to retain vehicles and houses. It's not fair to them that now they won't be able to get a new job because of the effects or situations that have happened to them in the past. Even the country as a whole is in debt. What would our government's credit score be? haha.

cadman53114
cadman53114

How an employer can say a person with good credit would be better than an employee with bad credit. Look at Enron. I bet those guys had AAA credit ratings. Look what they did.

russhartjr
russhartjr

I hope the practice is stopped unless the position is directly related to finance. My credit isn't the best due to a nasty divorce and an ex that lied to the military and wrecked my pay. It took almost a year to get the mess that she created straightened out, but before I did, my paychecks were $400/MONTH. Tried talking to the banks and showing them my pay stubs, but they wouldn't work with me. Needless to say my credit score took a major hit. I'm working diligently now to get it back up, but only time can help. If my present employer had used my credit score when they hired me, I wouldn't have a job now. It's one thing to check for criminal history, but financial history is a different story.

nospam.online
nospam.online

The only time a company should be able, with your permission to look is when you have hands on company money. Otherwise, with the error's I have to deal with and the common facts of today that of finanical trouble. No they should not be allowed.

joseph_mcmanus
joseph_mcmanus

Well, it's about frigging time they got off their buts to do this! I know that I've probably lost a couple of jobs due to it. I was out of work for 21 months, got a job as a field service tech, then wound up loosing said job because the company's senior management changed and the new guy decided that he needed to tighten up the ship. Any one care to guess what that's been doing to my credit scores? can we all say "SWOOSH"? And any one care to guess how much harder it's going to be to find a job ? Sorry, had to vent a little, but I'm really glad that that the politico's are finally earning their pay, now let's hope that it survives the next congress and the new way things are going to be done. Take care and hold on to your seats, it's going to be a bumpy ride.

ProformaScreening
ProformaScreening

As the VP for the background screening company, Proforma Screening Solutions, I clearly have a vested interest in the outcome of this discussion. that said, I do think it?s important to point out some of the findings of the recent Society of Human Resources (SHRM) survey: First, according to the SHRM study, only 13% of organizations use credit checks as a form of background screening. Second, only 9% of respondents said favorable credit check results were most influential in their hiring decisions. Third, the study found that employers use credit checks primarily for positions with financial responsibility, such as senior executive positions and positions with access to highly confidential employee information. This tells us that the use of credit checks is focused and narrow. Finally, 87% of employers said that background checks are NOT used as definitive hiring criterion. In other words, they do not base their employment decisions entirely on the basis of a credit check. There are many more compelling findings in the SHRM report to indicate that, for the most part (there are unfortunate exceptions) employers are not overly reliant on credit checks as a primary decision factor. And inconsistent with what many in the media will have us believe, the use of credit checks has not increased in the last six years during the economic downturn. Our view on employers? use of credit checks is this: Employers have a variety of methods to use in the process of screening potential employees. Background checks are important and are something employers have a right and an obligation to do in establishing their duty of reasonable care in the hiring process. Credit checks are just one of the methods employers can use and they should be treated as ?just one.? In other words, it rarely makes sense for employers to base their entire hiring decision on the results of a credit check. That said, credit checks can provide valuable insight which, when used along with other methods (such as reference checks, criminal background checks, education verifications, etc.), can help the employer better understand the totality of an individual. Employers have an obligation under EEOC guidelines to ensure the type of background check they use matches the risk and responsibilities of the position and that the factors used to judge the results of a background check (i.e. what shows up on the credit check) take into account the likelihood that what?s found will impact the applicant?s performance on the job. View the SHRM study results and read our recent blog post on the topic of employment credit checks at http://www.proformascreening.com/blog/2010/10/background-credit-check/

DaemonSlayer
DaemonSlayer

We know the truth. It is abused, just like everything else. Stats can be spun to mean almost anything. Especially if the right questions are not asked, the right answers aren't allowed, the pollsters for said survey are not honest, not enough spread/diversity in the pollsters, or said survey's underwriters have a stake in the outcome. Why do you think Consumer Reports doesn't accept advertising? It's so they aren't forced to please anyone with (undeserved) favorable reviews just to keep any kind of revenue. Look at most places now days that review things and are supported by advertisers. The review's information is practically taken from marketing without any real testing and results given. Underwriters have been known to have a direct influence on the outcome of surveys and statistics, in some cases fudging survey results or disqualifying those that disagree with the desired results. As you state, ProformaScreening, you have disclosed you have a stake in the outcome of this. Therefore you will push to keep the status quo and justify your position to protect your income. Kudos for telling us of your stake in the matter though. It's an honest thing to do as well as informs us what to think of your stance.

ltfannin-watts
ltfannin-watts

Case in point. One particular company changed vendors for their cafeteria. There were numerous employees of the old vendor that wer not hired by the new vendor. I spoke to one. He was told that his credit score in the lower 700's was too low. This employee prepared food on the grill and did not have access to any money or confidential information. He could not understand why it was necessary to check his credit score, and why a rating in the low 700's was too low for a food preparer. Others were told the same thing.

cadman53114
cadman53114

What this "Gent" fails to realize is that every credit check hits your credit score by 3-5 points. Even checking your credit score yourself will put a hit on your credit score. With the economy like it is, if you are out of work and hitting the pavement hard to look for a new job, then every application with a back ground check that runs a credit check puts your credit rating farther and farther into the dumper. Unless you are working for a bank, loan company, stock broker, insurance company, or an accountant, even looking at your financial situation should NEVER even be considered.

cmiller5400
cmiller5400

You are misinformed. Job inquires will NOT affect your credit score. quote from http://www.privacyrights.org/fs/fs6c-CreditScores.htm [i]5. Do Credit Report Inquiries Lower Your Score? Your credit report includes more than your record of paying bills. One section of the report lists inquiries. These are records showing who has accessed your credit report. There are various purposes allowed for companies to look at your credit report. * Your credit card company may monitor your report to review your account with them. This type of inquiry appears on your credit report, but does not affect your credit score. * Creditors and insurers review your report to see if you qualify for an offer. These "preapproved" or "prescreened" offer reviews do not affect your credit score. (For information on how to stop preapproved reviews, see www.privacyrights.org/fs/fs1a-basics.htm.) * You apply for a job and the employer orders your report. This inquiry does not affect your credit score. * You check your own credit report. This will not lower your credit score. The only credit report inquires that can lower your credit score are applications for new credit.[/i]

cmiller5400
cmiller5400

If the employer does the credit check [b]appropriately[/b] it should not have an impact on your score. I'm looking at my Experian report right now and listed under the section that states and I quote "These inquiries do not affect your credit score" is listed a bullet point "an employer who wishes to extend an offer of employment". So that brings up the point, if they are doing a Hard pull as you call it, they are doing it wrong then... And your point about multiple INQUIRIES having a negative affect, I believe you are mistaken: a HARD pull as you call it WILL stay on your report for 2 years (and affect the score). But the one's that are done by yourself, the credit bureaus, and others wishing to extend an offer of credit, employment or if you have an existing relationship and it is for account maintenance , do NOT count against your score.

WishtobeIT
WishtobeIT

The post titled "you are misinformed"'s response is PARTIALLY CORRECT. If an employer RUNS your credit (which IS NOT AN INQUIRY), then it will count and bring down your credit score. An inquiry is officially called a "soft" pull. He is correct: when YOU check YOUR OWN report, you ARE NOT PENELIZED...but that's not what this discussion is about. When you sign on the dotted line (with jobs, apartment complexes, auto dealerships, and such), they are doing a "hard pull"--which is your full blown credit report combined with your score. I agree with the very first post: Unless I am applying with a banking or financial institution, then my score has NOTHING to do with my job performance or skill set. As one who has had multiple layoffs (including two back to back in 18 months and some), my credit became bad because of layoffs not due to money mismangement. So if I am trying to seek employment, it's a double sword if you as an employer pull my credit. How am I or anyone for that matter expected to get back on my feet, work, repay my debt so that my credit score can improve, etc. IF I am denied everytime I fill out an application? (we're not even talking about getting hired...we're only dealing with the application piece). Also, multiple INQUIRIES (other than yours AND/OR the ones that the credit bureaus themselves pull--which they do) WILL stay on for TWO YEARS AND BRING YOUR SCORE DOWN. Check out fairissacs.com and some authentic sites to find out how this really works. Excuse my english, but it aint'right for an employer in a non-financial institution to keep pulling your credit. Credit IS NOT ALWAYS A TRUE JUDGE OF CHARACTER...ESPECIALLY WHEN MILLIONS OF AMERICANS ARE "DOWN ON THEIR LUCK." Thanks.

joseph_mcmanus
joseph_mcmanus

I think what I said in the title says it all! This gent has a "VESTED INTEREST" in seeing that nothing disturbs his rice bowl, Statement: "Second, only 9% of respondents said favorable credit check results were most influential in their hiring decisions." Response: If, well see the title! Statement: "Third, the study found that employers use credit checks primarily for positions with financial responsibility, such as senior executive positions and positions with access to highly confidential employee information." Response: I can see the financial part, but I don't get the "highly confidential employee information" part, maybe it's because I'm not an HR person! Lastly, I just hope that this Gent doesn't loose his gig, and have to be out on UI for a protracted period so as to have his pristine credit rating look like a 12 gauge hit it a point blank range with bird shot, and still try to find a new gig, they're doing it allot more than these self-serving "Reports" let on. Good luck buddy!

Juanita Marquez
Juanita Marquez

but if your facts and figures are correct, that means that 87% of the jobs we apply for SHOULDN'T mind that we object to a credit check because they don't use them anyway, assuming this well-stated post isn't simply a push for your company's services. I don't have a problem with a (reasonable) background screen. What I have a problem with is the fact that someone's purchases and mistakes or shrewdness make a difference to the 9-13% that request them. I also have a problem with them being used for more than the initial interview. There is NO good reason why a continued spot credit check at the employer's whim should be needed for someone not in Finance, and I hesitate even for the initial credit check. Luckily my credit is good. As far as a person's character and credit correlation, I have a feeling a number of the golden parachute guys at the bailed-out banks have excellent credit, inversely proportional to their morality when it comes to swindling others, and many dead broke or unemployed people I know that doubtless have spotty credit due to economical circumstances out of their control have stirling integrity. So that argument falls flat, as well.

Juanita Marquez
Juanita Marquez

When I apply for jobs, I cross out the line on the form that allows them to do multiple credit histories over the lifetime of my employment. I can see the POSSIBILITY of using ONE credit check at hire to evaluate my judgment on financial matters, but there is absolutely no reason to continue to do so once you have become an employee, unless you are directly handling large sums of money. My finances (or lack) and how I choose to spend or not is nobody's business when I am being asked to do something completely unrelated to money. If they balk at my reasoning, we are probably better off not doing business together. I have gotten a permanent job after doing so and explaining my reasons, so it is possible.

nospam.online
nospam.online

Having spent the past 6 year's trying to keep a defaulted credit card account that is not mine off my reports I can tell you that the credit report due to the failures of maintaining accuracy and following the laws that govern them they can not and should not be used. I am a home owner and live by a budget and pay my bills but have had debts, which were not even in my name put on my report and had to even sue to get them removed. The process is flawed and thus un-dependable for any real use. Example: How many have ever tried to get a wrong debt off the reports?

BeyondITall
BeyondITall

In 2007 I had a credit rating of 728. I managed to maintain this rating despite the fact that I have not a raise since January 2003. ( I work for a small company ) In 2008, with the ever escalating gasoline prices ( I was driving 100 miles/day ), utility prices and grocery prices I had to rely more on credit cards. Then came the financial collapse of 2008. Credit card companies began lowering my credit limit to what I owed on their cards. This lowered my availble credit and was a hit on my rating. I had a line of credit that was cancelled because the company that issued it was getting out of line of credit business and sticking strickly with their revolving credit cards. This was a hit on my credit rating. Then they increased the rates and raised the minimum payments. While I had alweays paid more than the minimum, usually 1 1/2 to 2 times the minimum, I was not in a position to where paying the minimum became a challenge. This is another hit on my credit rating. I defaulted on card because I was no longer able to meet their minimum payments due the rise in rates and minimum payment. This was another hit on my rating. I have not had a raise since January of 2003. Since I work for a small company and IT is an expense and not a money maker, as we all know, I have looked at other jobs in my field but they are paying less and requiring more. I am in a no win situation. Now, when you factor in my present credit rating, the likelyhood of my ever getting a better paying job is quickly deminishing. None of this reflects on how capable I am in my job or what I can bring to the table. IT is outsourced and wages are undercut. Welcome to the "New" American dream. Welcome to the fascism we now live under.

BeyondITall
BeyondITall

Have you ever tried it? How is it for you to sit at the top and to point blame towards anyone that has not achieved the same as you and you have presumed to be from their own lack of effort? Stop to think, if you will, should we have all achieved your job position then people of your job position would be common and worthless. You should be proud of what you have achieved, but you need to also quit blaming others that have not achieved what you have, thinking it should be simple and a worthwhile thing to do. Two questions. Do you still receive your bonuses and perks even when the directions you have taken have been costly to the company and to others? Perhaps a little self reflection would prove to be beneficial to you afterall. - What company do you manage? I feel it would not be beneficial for two arrogant souls, such as ourselves, to work at the same company. David and Golieth scenarios rarely work out as the Bible depicts, but sometimes they do.

BeyondITall
BeyondITall

I understand how easy it is to just lump everyone together considering the events of today. Sometimes it is not difficult to believe that everyone suffers from the same problems and for the same reasons. That is exactly why I feel a credit report on a potential employee is meritless unless that employeee will be involved with the financials of the business. I also agree that "fascism" would be a bit of a stretch. The more proper word to use is oligarchy - http://en.wikipedia.org/wiki/Oligarchy The fiancial industry has taken over control of nearly everyones' life with the exception of those that deal strictly in cash. As I have already shown, this is impossible to do in today's world. Even cash rich Microsoft has decided to open their own credit for the sole purpose of showing they are credit worthy should they ever need to draw on credit. What is an individual suppose to do? Thank you for taking to time to realize that everyone is different, their problems are different and the reasons for their problems are different. I believe it is time, as a society, to quit trying to pidgeon hole everyone else. The only common pidgeon hole we fit in is, we are all in this togehter. Directly or indirectly, but all together.

santeewelding
santeewelding

Having been sucked into it all, what else can you do. You most certainly don't wish to investigate your own self, for fear of what you will find.

NickNielsen
NickNielsen

to my satisfaction. The business was that I suspected you drove an SUV getting, at most, 20 mpg, and needed the credit cards to support your lifestyle. That that is not the case makes you a rarity. I wish you the best of luck with your financials. And FWIW, fascism (defined here) has [u]nothing[/u] to do with your situation.

BeyondITall
BeyondITall

1. I drive a six cylinder car that gets 24 MPG. 2. I was looking to purchase a new home in the early/mid 90's. When they ran my credit I was not able to secure a loan because I had NO CREDIT HISTORY. I had always paid in cash and did not use credit. I wanted to qualify for a home loan in the future so I opened lines of credit. ( We have now progressed to the point that we can not deal in cash only and be credit/debt free unless we already possess all the cash we will ever need to purchase what we will ever need )The more credit I had available and the more accounts I had a history on should have proved to be beneficial in obtaing a home loan in the future. AND IT DID! I now have a new home I purchased in 2005 on CREDIT. Before you say it, yes, I did pay down 22% and my notes are affordable and do NOT put a strain on my finances. Fascism comes into play when someone, such as myself, always paid in cash and then becomes disadvantaged when it comes to getting car insurance, home insurance, new car loans, home loans or anything else when you do not have a credit history. Now, it appears, obtaining a job can be included in this list? The financial control over us all in our every day lives is nothing more than fascism. You make me think of another question. Should I have remained on an all cash basis in my life and did not have a credit history, after over 40 years of having a job, what would be thought by someone wanting to hire me and they pull a credit report and find I do not have any credit to report on???? Are you a hiring manager? Can you, will you answer that question? What business is it of yours what I drive or how many credit cards I have? Do you imply that this too will become hiring criteria? How fascist is that when multi-national corporate interests are gaining more and more control over our political processes? We are not being governed by our elected officials but, rather, by the corporate lobbyist that influence the laws we live by. DO you want our government back? Declare open season on ALL professional lobbyist!

NickNielsen
NickNielsen

First, I'm curious. - Was the vehicle you drove to work a truck or a car? - Why did you have more than one or two credit cards? Second, what does any of this have to do with fascism?

lcave
lcave

How much should a prospective employer be allowed to see? Where do we draw the line? At one time I had the world's worst credit report, but have always been a very hard and dependable worker. We need to protect our privacy especially in this world that we helped to create.

erysipelothrix
erysipelothrix

As a contract employee in the DoD with a high level clearance, I find all of this humorous. As part of our lifetime non-disclosure agreement and lengthy background check, credit score (and credit worthiness in general) is part of the process. I've known several people, one very well who lost his clearance and job due to a nasty divorce and debt. This is not necessarily fair but it can demonstrate what kind of personal responsibility one takes of their financial well being. I would love to see some of the analysis correlating credit worthiness with sick leave, insurance claims, etc. The list is endless to see if it is an indicator of being a "good" employee. Bad credit as a result of losing a job due to economy or some other reason outside of your control is different than being irresponsible. I definitely think if it is used, circumstances should be examined. If you live beyond your means, you should pay a price. I pay my bills and live frugally, why can't others? This is no different than paying a higher insurance rate for being fat or smoking.

DaemonSlayer
DaemonSlayer

... to sit through someone explaining how he or she got where they were (for whatever reason) financially.

gharlow
gharlow

I believe a strong motivator in the use of credit checks is to eliminate those with a lot of debt or high house payments, who will most likely want more money or more quickly hop to a better opportunity in the future, rather than caring if you actually have good or bad credit. Personally I absolutely do not believe my personal financial information is anyones business, and feel it opens me up to identity theft etc. I have never submitted to a credit check for a hire and I never will. My credit rating is excellent and is no ones business except for the purpose of obtaining a loan.

Englebert
Englebert

...someone with less than stellar credit score will put in extra effort to keep his job and improve his standing ? Companies, these days are ' misbehaving ' and finding all sorts of reasons (both illegal and unethical ) to sift through candidates

GreenPirogue
GreenPirogue

I used to work in the area of Finance, and we used a credit score to identify potential applicants who had more of a motivation to do something that would get them and us in trouble. You have seen subplots in movies and on television where either the "inside man" has a bunch of debt from a gambling addition, and the thieves pray on that vunerability. I have seen statistical analysis that we hire people because they are attractive or tall, have a firm handshake or an "honest face." Seems to me all of those reasons are a bit soft. And there have been studies done that people with bad credit scores use more sick leave, etc. It does not mean someone with a mountain of debt will do this - just that they are more likely to do so. My credit score is okay - not great because I don't make a house payment (it is paid off), and I only have one credit card where I don't carry a balance. I am not saying it is fair to judge on this - though it makes sense from the employer's prospective. We don't hire convicted felons, and I can see where convicted felons have the same beef. "Hey, I am a good employee. I did something illegal outside of my job. It should be none of their damn business." I would eliminate a candidate with a bad credit score as long as it is legal to do so, but I would not chose one employee over another because they have a marginally better score.

Editor's Picks