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16 states consider banning credit checks on job applicants

Employee advocates are pushing back on credit checks for good reason

by Dory Devlin  |  1609 views  |  0 comments  |      Rate this now! 

Maybe you’ve been there: Filling out a job application when you’re close to getting a job, knowing that if you don’t check the box that gives your potential employer the right to check your credit history, you may be raising the red flag that costs you the job.

Most employers—60 percent—surveyed by the Society for Human Resources Management said they run credit checks on some job applicants, up from 42 percent of employers surveyed in 2006. Now, SHRM also reports that only 13 percent of companies actually perform them on all potential hires, and that they say they give applicants a chance to explain any credit problems they come across.

But here’s the thing: They may say they give applicants a chance to explain their credit situation—since there can be so many reasons for debt issues in this economy that may have nothing to do with the way an individual personally handles money. But how many just tell applicants, “we’ve decided to go in another direction” without telling them their credit reports were the reason why?

This AP story quotes Terry Becker, an auto mechanic who has struggled to find work, been turned down by eight employers he allowed to do credit checks, and was told by one employer: “If your credit is bad, then you’ll steal from me.”

The reason for his debt: Medical bills that piled up fast when his now 10-year-old son started having seizures as a toddler.

That’s one example for why 16 state legislatures are considering legislation to ban credit checks by employers, noting overuse of the ability to check credit histories can trap people in a cycle of mounting debt because past financial problems preclude them from getting jobs to pay their bills.

And that’s one reason why consumer advocacy groups are behind the legislation. Another is the very valid point that credit reports can include inaccurate information. So if employers don’t give job applicants a chance to explain their reports and histories, good applicants can be turned away from jobs for bad reasons.

Sure, a person’s credit history may be very relevant for jobs that are directly tied to handling money. So maybe an outright ban on them may be extreme. But an employer should have to prove why a look into closely guarded personal financial information is necessary to pass muster for every job.

It’s good to hear that most of the bills proposed this year are like the ones in Hawaii and Washington, which prevent employers from tapping into credit reports when hiring for most positions, but provide exceptions for jobs in banks and accounting departments, for example.

Have you ever wavered about checking the box allowing a company to look at your credit history? Has it ever cost you a job? Would you like to see credit checks removed from the hiring process?

This post first appeared on Yahoo! Shine.

About the Author

Dory Devlin is the Work+Money editor on Yahoo! Shine. Check out Shine Work+Money here.

Read more by Dory Devlin




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