United Front

It comes as no surprise that finding a job in this current economic climate is a major challenge for many.  There are a multitude of barriers to overcome, from the limited number of job openings to the challenge of re-entering the job market after many years away.   

However, a less likely culprit – credit scores – is increasingly becoming an obstacle that is making it even harder for the unemployed to find work. 

As discussed in a recent article posted at The Root (an online magazine), “A Bad Credit Score Could Keep You Unemployed”, credit checks are increasingly becoming a standard practice for employers.  This new practice creates an additional challenge for many job seekers who have been trying hard to make ends meet.  Precisely because of the economy and being unemployed, many have struggled to make all of their car or home payments, thus damaging their credit history.  It is a catch-22 for those unemployed with a less than perfect credit score; as Chi Chi Wu of the National Consumer Law Center states, “you can’t re-establish good credit if you can’t get a job, and you can’t get a job if you’ve got bad credit”[i].  

Why have credit-scores become such an important factor in hiring practices? According to John Ulzheimer, President of Consumer Education at Credit.com, “the recession has made this a buyer’s market when it comes to hiring, which may be leading more companies to use credit reports as screening criteria”[ii].     A study done by the Society for Human Resource Management (SHRM)[iii] indicates that of the employers who use credit checks, a majority use them only for specific positions (such as those with financial responsibilities), and many will provide the applicant a chance to explain the results before any hiring decision is made.  Additionally, the study indicates that the main reasons cited for using credit checks include reducing/preventing theft, embezzlement or other criminal activity, assessing the overall trustworthiness of the candidate, and complying with state laws requiring such a check for a specific position.

However, while some employers are using good credit as evidence of a prospective employee’s trustworthiness, there is arguably no empirical evidence to support that theory.  According to the chief industrial psychologist for the EEOC, “information in credit reports provides almost no reliable indication of how a prospective employee will perform”. Many have expressed concerns about employment discrimination as a result of these credit checks. There is particular concern regarding the disproportionate effect that this practice has on African Americans, who are 27% more likely to have negative credit histories, according to the National Council of Negro Women[iv].  In response, the Equal Employment Opportunity Commission (EEOC) has begun to review employer’s use of credit checks in hiring practices.  Additionally, Illinois and Oregon have already forbidden the use of credit checks by employers and many other states have started lobbying for similar legislation.

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[i] Sherrilyn A. Ifill, “A Bad Credit Score Could Keep You Unemployed,” The Root, November 15, 2010, http://www.theroot.com/views/bad-credit-score-could-keep-you-unemployed.

[ii]  Ruth Desmond, “Consumer Credit Reports and Privacy in the Employment Context: The Fair Credit Reporting Act and the Equal Employment for All Act,” University of San Francisco Law Review, 44 U.S.F. L. Rev. 907 (Spring 2010).

[iii] Gerald E. Calvasina, Richard V. Calvasina, Eugene J. Calvasina, “Use of Credit Checks in Employee Selection,” Proceedings of the Academy for Studies in Business: Vol 2,No 2 (2010). 

[iv] Sherrilyn A. Ifill, “A Bad Credit Score Could Keep You Unemployed,” The Root, November 15, 2010, http://www.theroot.com/views/bad-credit-score-could-keep-you-unemployed.