Under Fire: Mixing Credit Reports With Hiring Decisions


What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Employers are increasingly turning to credit scores to help screen applicants who may be unreliable or a risk of theft. But many states are questioning using credit scores to judge someone's job qualifications.

This story comes from partner site lowcards.com

According to the latest figures in September, the unemployment rate was 9.6%. A total of 14.8 million people were unemployed last month and 41.7% of those have been out of work for six months or more. Good jobs are hard to find, and may be nearly impossible if you have bad credit.

Employers are increasingly turning to credit scores to help screen applicants who may be unreliable or a risk of theft. But many states question the fairness of using credit scores to judge someone’s job qualifications. The House has proposed a bill that will prohibit this.

“Credit checks can weed out people who may be undesirable for a job, but there are many reasons why a person’s credit score drops that is not a reflection of their character. If a person has a lower score because the credit card issuer slashed the card’s credit limit or there is an error on the credit report, this shouldn’t prevent that person from getting a job,” says Bill Hardekopf, CEO of  LowCards.com and author of The Credit Card Guidebook.

Why Employers Use Credit Checks

Fraud is a high cost of business. The median fraud loss for U.S. companies is $160,000 according to the Association of Certified Fraud Examiners (ACFE) 2010 Global Fraud Study. The study found that two common warning signs for employees who commit workplace fraud are having difficulty meeting financial obligations and living beyond their means. The study went on to say that these signs can not be detected by traditional methods.

According to a recent survey from the Society for Human Resource Management, 60% of employers use a credit check during some stage of the interview process (65% of large businesses); 13% reported conducting credit background checks on all applicants. 47% of employers who do credit checks do them on select job candidates.

The majority of businesses who do credit checks run them after a contingent job offer and allow job candidates to explain their credit results before the hiring decision is made.

According to the survey, only specific credit information impacts hiring decisions. Pending debt lawsuits and accounts in debt collection are the biggest red flags. Very few consider home foreclosures and past medical-related debt when making an employment decision.

Legal Regulations

The Fair Credit Reporting Act authorizes employers to run a credit check on applicants, but employers must have the applicant’s consent. If the employer considers denying a job because of a credit check, they have to provide a copy of the report and a written description of the applicant’s rights before taking adverse action. The individual also has the right to dispute the accuracy or completeness of any information the agency furnished. The person has the right to an additional free consumer report from the agency upon request within 60 days.

A new bill, H.R. 3149, was introduced this summer to amend the Fair Credit Reporting Act to prohibit the use of consumer credit checks against prospective and current employees for the purposes of making adverse employment decisions. The bill is now in committee.

State lawmakers in 16 states have proposed bills to ban credit checks. Hawaii and Washington already ban credit checks on most applicants.

The Fair Credit Reporting Act also allows employers to use credit reports to evaluate employees for promotion, reassignment, and retention, but it must follow the same rules as the application process.

Protect yourself

Check your credit report for errors. An error on your credit report can prevent you from getting a job. You can get a free credit report each year from the three credit agencies–Experian, TransUnion, and Equifax–at annualcreditreport.com

  • If you find errors, alert the credit-reporting bureaus and creditors in writing. Correcting errors takes time, so review your history at least a month or two before you expect employers, or lenders, to request it.
  • Understand what is in your credit report so you can explain any problem areas. Your credit report includes debt, payment history, number and types of accounts. If you have been through lawsuits, judgments or bankruptcy (bankruptcies remain on your report for 10 years), it will also include these.
  • Do all you can to increase your credit score. Pay all your bills on time. Cut your debt to credit ratio by decreasing the balance on your credit card. Limit your new credit applications.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: Considering a Fixer-Upper? 15 Ways to Avoid a Money Pit

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,090 more deals!