Monica Cotallat, Hudson Community College Professor Sakina Laksimi-Morrow English 102 March 17, 2013 BAD CREDIT CAN HURT JOB SEEKERS I am a student majoring in Graphic/Web Design. This is my 4th semester at Hudson Community College. A large number of employers use credit checks to make employee selections. A study made by the Society for Human Resource Management (SHRM) in 2010 reported that 47 percent of respondents only use credit background checks for job applicants in certain types of positions, for example, positions with fiduciary and financial responsibilities (SHRM, 2010).
Thirteen percent of those surveyed conducted credit checks on all candidates while 40 percent in the SHRM study reported that they did not utilize credit checks on any job candidates (SHRM, 2010). Almost half of employers are running credit checks. What are they looking for? Is it an invasion of privacy? Is it fair? What can be done about? Are people with a blemished financial past scarred for life? The purpose of my paper is to understand why this is happening, examine its reasons and what one can do to help themselves in a competitive work force.
There is an array of tools employers use to examine and decide on job applicants and employee job promotions. Typically they will contact references, verify educational and/or professional history, request a criminal history report and in certain situations obtain an individual’s credit history. For some this can create a barrier in the search for employment. A study made by the Society for Human Resource Management (SHRM) in 2010 reported that 47 percent of respondents only use credit background checks for job applicants in certain types of positions, for example, positions with fiduciary and financial responsibilities (SHRM, 2010).
Thirteen percent of those surveyed conducted credit checks on all candidates while 40 percent in the SHRM study reported that they did not utilize credit checks on any job candidates (SHRM, 2010). This showing almost half of employers are using credit checks on job applicants which economic downturn has made it harder for some people to get a job due to bad credit. It’s a catch 22. You need a job to pay your debit down but because of your bad credit you can’t land a job. There is also the question of invasion of privacy.
Many job applicants have concerns with employers asking questions or requesting an explanation on why they are behind on their bills. Whether tarnished credit is due to medical bills or a messy divorce is it really necessary to explain personal matters to an employer? Is this a violation of rights? From my readings it appears NOT to being a violation. Under the Fair Credit Reporting Act (FCRA), employers are allowed to obtain and use employee’s credit report. However there are guidelines for requesting this information.
An employer must inform the applicant about checking into their background and the applicant must sign giving permission to the employer to access the credit/background check. One has the right to refuse such a background check but most likely a spot for candidacy will go out the window. Employers use it as a measure of character. Poor credit history may cause a potential boss to question your dependability, decision making skills, constancy and follow through abilities. Also presumably this helps employers prevent theft or embezzlement for fear of lawsuits.
However, there is no concrete evidence connecting people’s credit histories to their on the job performance or productivity. In 2010, Eric Rosenberg, director of state government relations for Trans Union, one of the country’s largest reporting companies told Oregon legislators “At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud. ” Oregon since then is one of 7 states who had passed a bill prohibiting/limiting the use of credit histories in job screening with certain exceptions.
Other states who share this law are: Washington, Connecticut, Hawaii, Illinois, California and Maryland. But some of the laws still need reinforcement and exemptions slimmed. For example Illinois allows employers to continue to do credit checks on managers and minor retails workers. Sixteen other states are considering legislation to limit employer use of credit checks: Georgia, Indiana, Louisiana, Michigan, Missouri, Minnesota, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, Vermont, Wisconsin and District of Columbia.
While these states propose limiting the use of credit check none of the statutes imposes an out right ban. Besides the question of violation rights there is also the question of discrimination. The Equal Employment Opportunity Commission says, “Employer credit checks are legal, but can be discriminatory if they disproportionately exclude minorities, women or people older than 40 and are not essential to a hiring decision. A 2007 report conducted by the Federal Reserve Board found out that African-American and Hipics had considerably lower credit scores than non-Hipics whites. The last 10 years attractive lending schemes zeroed in on communities of color who lacked in wealth and assets. During the housing boom, minority borrowers were lured into subprime (high interest) loans when in reality they qualified for prime loans. In result after the crash, African Americans, Latinos and Asian-Americans lost half of their family wealth. Employment credit checks are hitting these families hard.
This is why organizations like the Lawyers Committee for Civil Rights, National Council of La Raza and the National Association for the Advancement of Colored People (NAACP) have publicly opposed the use of employment credit checks. Another factor is age discrimination. Perhaps an elderly person carries poor credit due to medical bills. As I mentioned earlier, it can be an invasion of privacy by feeling obligated to explain reasons for unpaid bills but to explain bills due to health issues can make the job seeker uncomfortable discussing personal medical histories.
This brings fear of losing a job opportunity to a younger, healthier credit worthy applicant. Contrary to Americas strong belief in a right to privacy of their medical histories and an amended act in 2003 to the Fair Credit Reporting Act that requires medical debt to be masked on credit reports and the Americans with Disability Act, which prohibits employers from inquiring about medical history prior to making a job offer. Courts have recognized the discriminatory impact of employment credit screening.
The Department of Labor won a verdict against Bank of America stemming in part from the bank’s use of credit checks to hire entry-level employees, which had a discriminatory impact on African-Americans. The country’s challenges with constant layoffs and mortgage foreclosures leave many Americans struggling with maintaining healthy credit. As of April 2010, one-quarter of U. S. consumers, nearly 43. 4 million people, had poor credit. These people should not be omitted from the chance of recovery. Laws need to be tightened and screening should only be applied depending on the nature of the job.
Even if hired with a less than desirable or acceptable credit post-employment credit checks can be used to facilitate promotions and transfers. If one has signed the credit consent document when started employment, the employer does not need your signature again. As per the Federal Trade Commission (FTC), if an employer denies you employment or promotion due to credit they must give you a copy of the report used to determine your worthiness and a document called A Summary of Your Rights Under the Fair Credit Reporting Act before taking adverse action.
Of course for companies to be forth coming is different story. They can easily say they opted for a different more qualified candidate. Nevertheless, I have listed below steps and tips to help with the job application and interview process. Until those states without credit screening laws pass a bill to protect job seekers we must learn to deal with the issue and voice our rights. • Request your report from the three reporting agencies: Experian, TransUnion and Equifax. You may request a free annual credit report by visiting www. nnualcreditreport. com or you may call 1-877-322-8228. Review your credit report to ensure its error free. Dispute any errors if found. It takes seven years to remove negative credit off your report but to improve a credit score the sooner you start improvement immediately shows. This is a good way to sell your self to employers as you can promote yourself as one who is aware of mistake and imperfection but you have taken steps to rectify and reestablish yourself. • Do not be afraid to confess immediately.
Not as quickly as stating it in your cover letter but when meeting face to face. This may eliminate you from consideration but in early process the company is still looking for reasons to eliminate candidates. Better to be forthcoming in the front to avoid 5 interviews down the road and having to hit that credit history bump. • If you avoid mentioning early regarding your credit usually one knows the final stages of the interviewing process. At this point inform them about your credit. Most people do not like surprises especially companies ready to make an offer.
This will add value and removes the surprise. • Also how you address it influences how the information will be received. The bigger the deal you make of it, the more attention they’ll give it. Share the information with a smile and positive outlook off-handedly. You are communicating that it’s no big deal. May use this approach for example “I wanted to let you know that during my time unemployed I was juggling my bills and ruined my credit. Since you will be running a credit check I wanted to alert you. Will my temporary bad credit be an issue? In short words you have given them the “why” which would have put them on edge and eased them with the problem being “temporary”. In my opinion if credit screenings for employment is a must then only allow looking partial history. Perhaps just for the last 12 months. Companies should only be allowed to view history once at the hiring point and not during the life of the employed at the company. If a position is rejected to a candidate for credit reasons the company must be required to confess this to the unemployed.
This gives the job seeker awareness to the issue. Fraud happens often in many institutions. Just because one hold bad credit does not make them a poor employee. In turn they maybe a superior employee as they need and value their job which helps pay their debit. Chris Ball, operations manager for the Jackson, Miss. , branch of Express Employment Professionals said “he understands that hiring managers who use credit scores are trying to protect their companies from people who might be desperate and turn to embezzlement or theft to cover their bills. But he also says he’s not sure that using credit reports is all that useful: “In this day and age, it’s hard to find anyone with perfect credit” I completely agree with the above statement. We have done just fine with regular criminal background checks. I do not find the need to also use credit screening with the exception of finical institutions. I ask the question “Did Bernie Madoff have bad credit? Surely not but was he not responsible for the largest financial fraud in U. S. history? Did someone run a credit background check on him? ” I am sure NASDAQ did but did this prevent embezzlement?