Sure, there was a time when she thought she could be a rock star. But the only thing that rose to the heights of her imagination was her credit card debt. Hey guitars and amps are expensive … and she really thought that next gig would be her ticket to stardom.
Her life looks a lot different now. All those unpaid bills – and her rock-star dreams – are both things of the past. Yet her previous credit history haunts her like that horrible performance in Poughkeepsie. Should her previous financial flops keep her from getting a job now?
Some employers say yes. And some legislators are out to change that.
Approximately 13 percent of employers surveyed by the Society of Human Resources Management (SHRM) said they run credit checks on all job applicants - with another 47 percent considering credit history.
Employers say they run checks to learn more about an applicant’s honesty and sense of responsibility. Lawmakers say the practice is unnecessary and keeps people in debt because their past financial problems prevent them from obtaining work.
Currently, lawmakers in at least 16 states have proposed outlawing credit checks. And late last month, the EEOC held a public meeting to address the use of credit history as a screening tool. With unemployment reaching such high levels throughout the country, there's growing concern that credit checks are unfairly excluding certain applicants from legitimate job opportunities. (Keeping our aspiring performer from earlier singing the blues when she should be pulling in a steady paycheck.)
Representatives from a variety of stakeholder groups shared their views at the public meeting. Chi Chi Wu of the National Consumer Law Center (NCLC), for instance, explained that credit histories create a “fundamental Catch-22” for job applicants during this time of high unemployment and high foreclosures. She adds: “You can’t re-establish your credit if you can’t get a job, and you can’t get a job if you’ve got bad credit.”
Other concerns expressed in the meeting are that credit checks:
• can negatively impact certain protected groups, including women and people with disabilities;
• are a poor, or unreliable, predictor of job performance; and
• are often inaccurate or riddled with errors.
It will be interesting to see how this issue plays out in the coming months. Personally, I feel that there a lot more reliable indicators of an applicant’s skills and trustworthiness than their credit history. I also know too many solid, hard-working professionals who fell victim to the real estate bust and economic downturn … and whose financial challenges play no part in their “hireability.” These people are not washed-up rock stars who need to turn in their mics and guitars.
In the meantime, remember that the Fair Credit Reporting Act (FCRA) requires employers to obtain an applicant’s written consent before requesting a credit report. And if you decide not to hire or promote someone based on details in the report, you must provide a copy of the report and let the applicant know of his or her right to challenge the report.