The latest hiring hurdle: your credit history

By Michelle Singletary
Saturday, October 23, 2010; 5:16 PM

Job applicants painstakingly pore over their resumes and cover letters because studies show that hiring managers have little tolerance for any mistakes. And now, there's something else for applicants to worry about - their credit profiles.

At the same time the lagging economy is adversely affecting people's personal finances - and thus their credit histories - employers are scrutinizing the way people pay their bills as part of their screening process.

The U.S. Equal Employment Opportunity Commission is so concerned about this trend that it held a hearing recently to examine the potential impact on workers.

The Fair Credit Reporting Act allows employers to pull credit reports on employees and job applicants as long as certain disclosures are made. An employer has to get written authorization from the individual to view a report and then must give the worker or applicant a copy along with a written description of the person's rights before taking any adverse action based on what is in the document.

The Society for Human Resource Management says job applicants shouldn't worry too much about credit checks. Although about 60 percent of organizations use credit checks when selecting employees for some jobs, only 13 percent conduct credit checks on all job candidates.

"Credit check results are one important component of the hiring decision but are not typically the overriding factor in the consideration of a job candidate," Christine Walters, a human-resource professional and lawyer, told the EEOC.

While some employers may review credit histories thoughtfully, others may automatically screen out all applicants with a weak credit record, testified Chi Chi Wu, a staff attorney at the National Consumer Law Center.

Wu fears that job candidates, especially minority applicants who are often the victims of predatory credit practices, will not be fairly judged based on their ability to perform a job and will be shut out of employment because of their credit histories.

She's not alone in her concern. Eighteen states and the District of Columbia have recently considered legislation to restrict the use of credit reports in hiring, according to the law center. Oregon and Illinois recently enacted laws restricting the practice.

Wu told the EEOC that it should prohibit or, at the very least, greatly restrict the use of credit reports in the hiring process.

"A simple reason to oppose the use of credit history for job applications is the sheer, profound absurdity of the practice," she said. "Using credit history creates a grotesque conundrum. Simply put, a worker who loses her job is likely to fall behind on paying her bills due to lack of income. With the increasing use of credit reports, this worker now finds herself shut out of the job market because she's behind on her bills."

Here's the underlying question that so far has no definitive answer: Do workers with money troubles have a propensity to steal from their employers?

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