Can Bad Credit Cost You A Job?

In a recent CNN report, it was revealed that 60% of prospective employers run credit checks on job applicants and 13% do is as a matter of standard operating procedure. 

Increasingly, many employers believe that bad credit correlates to poor character and therefore justify their use of credit checks as a screening tool to help them find the best candidates.They claim that prospective employees with poor credit are more likely to steal or to cause trouble down the line.

As the recession deepens and job losses continue, many people, through no fault of their own, are finding it harder and harder to pay their bills. These folks may have had triple A credit at one time, but now their credit is damaged because they can’t pay their bills due to a loss in income. Families are losing their homes for the same reason. Is it really fair to deny these people a job and therefore the means to rectify their finances because of the state of their finances? It seems a really bad Catch-22.

For some jobs, such as high level jobs in financial institutions and other jobs that involve handling large sums of money, it might make sense to run a credit check.  At the same time, it is a hard sell that blemishes on your credit report mean that you’re a thief.

Certainly, for jobs that don’t involve large sums of money, such as working in an office or being a cashier, credit checks should not be used in the employment screening process much less even be run. In fact, an Eastern Kentucky University study conducted in 2003 found that there was no correlation between credit history and job performance.

There is an effort underway in Congress to limit the ability of employers to use credit checks to screen applicants. The bill is called the Equal Employment for All act and with exceptions for financial institutions, the government, and certain jobs requiring security clearances, the law would prohibit employers from basing hiring decisions on a job applicant’s credit history.

Of course, even if this bill passes, it would be interesting to know how it would be enforced. Most employers don’t give rejected applicants any reasons why they weren’t hired, and even when they do, it is almost always very generic.  The simplest reason an employer can give is that he’s hired someone more qualified. Even if the decision was based on a credit report, it almost always never comes up. 

The only way to stop employers from using credit reports in hiring decisions is to make it illegal for them to even ask for a credit report in the first place.  With certain exemptions, there is no reason for most employers to have this information at all.

Now, more than ever, it is important for you to know what’s on your credit report. Find out here.

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