Many factors determine your candidacy for employment, including an attractive resumé, a detailed cover letter, and a stellar interview. But your credit history could also be subject to scrutiny.
As high unemployment continues to threaten the recovery of an ailing job market, the issue of credit screening has recently grabbed the spotlight.
Employers are permitted to pull the credit reports of job applicants and employees as long as they receive written consent to do so under the Fair Credit Report Act. A copy of the report must be provided to the applicant or worker and disclosure of their rights must be granted before any action is taken based on the information on the report.
Concerns over the practice of running a credit check on job applicants reached the U.S. Equal Employment Opportunity Commission (EEOC), which held a hearing last week to discuss the possible impact that credit checks on job seekers and current workers. The practice was examined by advocates on both sides in the matter.
What Your Credit Says About Your Job Performance
How an employer analyzes your credit report can vary from company to company. A credit history provides no definitive answer on how an employee will perform at work. The amount of emphasis on a good credit report depends solely on the employer.
A recent study by the Society for Human Resource Management found that 60% of employers used credit checks in their selection process of job candidates, while only 13% of this group performed credit checks on all job applicants.
To some employers, a credit report may reveal the behavior of an employee or applicant when it comes to fulfilling their responsibilities and doing so punctually. To others, it reveals an individual’s financial situation and the likelihood that this person would steal from or defraud the company to pay their bills.
Credit checks are deemed appropriate in certain industries that involve handling of money or financial assets. Otherwise, advocates against the practice want to limit the use of credit checks because they strongly believe that a bad credit history is not indicative of poor job performance.
In the past three years, four states have enacted laws restricting the practice, with 20 other states soon to follow if the proposed bills are passed.