Since a 2010 survey released by the Society for Human Resource Management (SHRM) – ‘Background Checking: Conducting Credit Background Checks’ – found that 13 percent of the companies surveyed checked the credit reports of all job candidates while 47 percent checked the credit reports of some job candidates, many job seekers looking for work are wondering if their bad credit will affect the outcome of their job search. These jobs seekers need to know that there are limits to what employers can see in employment-related credit checks and how they can use that credit information, according to the article ‘Can Bad Credit Ruin Your Job Search?’ by Susan Johnston on Bankrate.com.
In the article, Johnston outlines the following little known truths about credit report checks done for employment screening that jobs applicants need to know:
- Employers Cannot See a Job Applicant’s Credit Score: Contrary to popular belief, says Johnston, employers only see credit reports of job applicants and not their credit scores during the employment screening process. Credit scores – a number usually between 300 and 850 representing the credit risk of a consumer – are not the same thing as credit reports, which offer an overview of how much debt a person has and whether he or she pays on time.
- Employers Look for Patterns: Employers look at long-term trends to see if the job applicant can handle their personal finances, and not whether the person missed a loan payment or forgot to pay a bill.
- Job Applicant Consent is Required: Before an employer can view the credit report of a job applicant, they need the job applicant’s permission in writing, a requirement under the federal Fair Credit Reporting Act (FCRA).
- Most Employers let Job Applicants Explain: Under the FCRA, before an employer can make an adverse decision based on a job applicant’s credit report such as denying employment, the employer must inform the job applicant and provide a copy of the credit report. While not required by law, the study from SHRM found that 65 percent of employers surveyed said they gave job applicants the opportunity to explain their credit report contents before making a hiring decision.
- Some States Limit Employment Credit Checks: Hawaii, Oregon, Washington, Illinois, and most recently Maryland already have laws limiting employment screening credit checks done by employers – except in a few specific instances – and many other U.S. states have bills restricting this practice pending in legislation.
- Credit Reports are Just One Consideration: Credit reports are rarely the deciding factor in hiring a job applicant and there are only a few cases where a company chose not to make a job offer based on the findings of a credit check. Along with work experience and character references, those quoted in the article say credit reports are just “one piece of the pie.”
- Credit Checks May Continue After Job Applicant is Hired: Nearly 20 percent of employers conducted ongoing credit and criminal background checks – or both – on employees after they were hiring for jobs such as those with access to confidential information, according to the 2010 SHRM survey. In addition, 5 percent of employers surveyed performed post-hire credit checks for all employees.
Johnston concludes that job seekers should not wait until they are asked to share their credit report with potential employers without thinking about what may be contained in that report, just as they would not wait until they are applying for a car loan or a mortgage to think about their credit report.
Since the controversy over employers using credit reports for employment screening background checks has increased recently, Attorney Lester Rosen, founder and President of Employment Screening Resources (ESR), a background check provider located in the San Francisco area and accredited by The National Association of Professional Background Screeners (NAPBS®), advises employers not to use credit reports for employment decisions unless there is a “clear business justification” related to the job in question to avoid running afoul of the U.S. Equal Employment Opportunity Commission (EEOC), which held a public meeting in October 2010 to hear testimony on the growing use of credit histories of job applicants as selection criteria during employment background screening to see if the practice is discriminatory.
While Rosen claims credit checks are one method employers may use to hire honest and trustworthy employees that also provide some legal cover if that employee turns out to be dishonest, he does not encourage routine credit checks on all candidates since credit checks often contain errors and can feel like an invasion of privacy to job applicants. His advice for employers is to limit credit checks to relevant positions such as those that involve money or sensitive data. In fact, with many states recently passing laws limiting the use of credit checks for employment purposes, employers need to be careful when, to whom, and how they perform credit checks on prospective job applicants.
Rosen also says most job applicants are unaware there is a special version of the credit report used for employment purposes that does contain information such as the credit score. To help job seekers better understand credit checks, Employment Screening Resources also supplied research for a white paper – ‘The Use of Credit Reports in Employment Background Screening: An Overview for Job Applicants’ – available on the NAPBS website at:
The article ‘Can Bad Credit Ruin Your Job Search?’ by Susan Johnston is available at: http://www.bankrate.com/finance/personal-finance/can-bad-credit-ruin-your-job-search.aspx#ixzz1LxxvXoPx.
About Employment Screening Resources (ESR): Founded in 1997 in the San Francisco Bay area with a mission to help employers and employees maintain safe workplaces, Employment Screening Resources (ESR) is accredited by The National Association of Professional Background Screeners (NAPBS®) and wrote the book on background checks with ‘The Safe Hiring Manual’ by founder and President Lester Rosen. For more information about ESR, visit http://www.ESRcheck.com or email ESR News Editor Tom Ahearn at tahearn@ESRcheck.com.