Employer Credit Checks: Are They Costing People Jobs?

Source: iStock
Source: iStock

If finding and securing a job feels like it’s harder than ever, it’s because it truly is, in many ways. It seems that these days employers are doing almost everything they can to find a reason not to hire someone. Employers spend a significant amount of time and resources investigating potential employees. They use software to track thoughts and emotions, scour social media networks for any red flags, and in many cases, drag out the hiring process for months. And yet, there are millions of job openings around the country, all waiting to be filled.

One more tool employers use are credit checks. And it’s causing quite the fervor among applicants, due to the potential legal complications that could result.

The Cheat Sheet has discussed these credit checks before, and there is a good deal that job applicants should know. For example, employers need permission to actually check your credit, and the actual credit score will remain unseen. Even so, it can be unsettling to know that a potential employer — someone you do not know, or work for, mind you — can dig into your financial history, and make a hiring decision based on what they find.

You have a certain amount of control over other factors, like social media. You can always put in certain measures to limit your exposure if there are questionable photos of you all over Facebook. But if a potential employer asks for permission to check your credit, it can be tricky. If you say no, they may send you packing. If you say yes, they may not like what they find.

There are some legal protections for applicants, however. Nolo says employers have to follow the rules laid out in the Fair Credit Reporting Act, which says they must notify you if you’re not hired because of your credit report’s contents, and any number of local laws that may exist. Those local laws are likely what give you the most protection, such as in New York City, where the City Council passed a law saying that employers could not check the credit reports of applicants.

And there’s more good news: the majority of employers, at least for the time being, are still opting not to check credit reports. According to an article from Credit.com, via USA Today, 53% of companies weren’t pulling credit reports as of 2012. That’s a number that has actually increased over the years, up from 40% in 2010, per survey data from the Society for Human Resource Management.

That’s a good sign, but it still doesn’t address the real issue at hand: what the hell are these people looking for when they’re pulling credit reports of applicants? The answer, per the same Credit.com piece, revolves around responsibility.

“What employers are really looking for — again, if they look — are patterns of money mismanagement that could put the employee in a position where they may not be the appropriate person to manage the money on behalf of the company or might make them a little bit more susceptible to compromise their ability to handle sensitive financial information,” Elizabeth Bille, vice president and associate general counsel of Society for Human Resource Management told Credit.com.

That makes sense, and should help ease concern. But still, in the years following the recession, a lot of people have some significant blemishes on their report that they might be concerned about. Bille says they shouldn’t worry, particularly about education or medical debt. Employers mostly just want to see that you can take some responsibility.

That doesn’t make the process right, in the eyes of many, or any less stressful. A big step for a lot of people toward repairing any credit or debt issues they’ve had is securing a job, and that prospect could be ruined by the very report or debts they’re attempting to address with a new job.

So, check your local laws, and see what protections are afforded to you. It’s also important to remember that you’ll be aware of any checks employers are doing, as they’ll need permission. It’s still a questionable tactic, but one that is very much part of the hiring process for many organizations. The best you can do is to stay on top of your credit, and do what you can to address any issues that can be found on a report.

Follow Sam on Twitter @SliceOfGinger

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