Credit Checks = Legal Discrimination for Employers

Posted by | January 3, 2011 | Job Search, Recruiting

You might think employers want to stay as far away from discriminating practices as possible. What you don’t know is that many are using a legal strategy by which to discriminate, often times unfairly. I’m talking about credit checks in the hiring process. Many employers have begun using this as a way of determining someone’s “reliability” or worthiness before making an offer of employment. What’s wrong with this picture?

Let’s review:

dis·crim·i·nate

–verb (used without object)

1. make a distinction in favor of or against a person or thing on the basis of the group, class, or category to which the person or thing belongs rather than according to actual merit; show partiality.

–verb (used with object)

2. to make or constitute a distinction in or between; differentiate.

Since employers are using credit checks to separate classes of people, by definition it’s discrimination. It’s legal and it’s an ugly practice, especially in a time of economic turmoil and record numbers of home foreclosures. This type of hiring practice not only perpetuates discrimination but it further injures our economic recovery as a nation.  There are so many still unemployed that there was recently another extension on unemployment benefits for those that have exhausted theirs. During that time of receiving unemployment, do you think those people were able to keep up with their credit card payments?  Now they face losing job opportunities for making the choice to feed their families instead of maintain their credit score.

Since when did hiring someone to do a job have anything to do with their credit? Since when did hiring someone have anything to do with anything other than their qualifications and abilities? Now more than ever, employers continue to use this form of discrimination as a way to narrow the pool of candidates. There’s only one problem with this type of competition – it leaves the most unfortunate victims of the economy out of the game altogether.  I find HUGE fault with eliminating a hard working and qualified candidate because their house is in foreclosure or they haven’t been able to keep up with credit card payments. First penalized by the economy, now penalized by employers. How is the workforce supposed to recover? We should be questioning laws that allow any kind of discrimination in the work force. Employers need to get their heads out of the clouds and start looking at people instead of credit reports and numbers.  I don’t care what some psychologist says about credit being a basis for knowing if someone is reliable or trustworthy. I don’t care what your CFO says about keeping hiring costs/risks down – discrimination is discrimination. Spade. The end. Is that really the picture you want to paint of your organization? “Oh, we’re a really great company to work for – as long as you have good credit!” This is the real world, perhaps you should join us.

Here’s what you need to know if you’re a job seeker:

1. Employers can legally request permission to run a credit check on you.

2. Employers are REQUIRED to get your signature on a permission form to do so. This could be on a job application too, so READ CAREFULLY what you are signing!

3. The credit check isn’t detailed, but gives the employer your credit score and # of delinquent accounts.

4. Get a copy of your own credit report.  Being proactive about your credit is a better approach than being reactive.

There are a lot of ways employers can silently discriminate against you but this is by far the most widespread and legal way it’s done. Now, tell me your thoughts on how we can fix this….

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28 Responses to “Credit Checks = Legal Discrimination for Employers”

  1. Comment made by Ablanco_2001 on Jan 3rd 2011 at 7:52 pm:

    The practice of obtaining a credit report for prospective employees is a common practice in government circles. Particularly when there is a security clearance involved in the job. As far as I am concerned any non-classified industry work should be open to anyone regardless of credit history.

    Albert

    • Comment made by Anonymous on Jan 3rd 2011 at 8:15 pm:

      Albert, I agree with you – when it comes to secured positions and those involving large amounts of cash handling (such as manning an armored vehicle or working in a bank) this could be a useful act.

      • Comment made by guest on Jan 3rd 2011 at 9:47 pm:

        It still makes the assumption that a bank teller who is down on their luck is somehow prone to criminal activity without having had any criminal background. How is it just to make that assumption about any worker without any correlating evidence?

        • Comment made by Anonymous on Jan 3rd 2011 at 10:04 pm:

          Agreed, however – banks have backing by the FDIC – which I assume has some regulation on hiring practices. I don’t know for sure that is the case but I think screening out those in financial related positions with financial related criminal history or complete disregard for creditors (not those with extenuating circumstances) is just.

      • Comment made by Knr313 on Nov 6th 2011 at 9:16 am:

        I disagree! Just because my credit is negative does not mean I will steal! We have so many executives who has excellent credit and yet they embezzle! thats why their credit is so good!

  2. Comment made by Lance Haun on Jan 3rd 2011 at 8:50 pm:

    Good article but two points:

    1. Employer credit checks don’t come with the score (or I should say they shouldn’t). Depending on the vendor, it can have a variable amount of information though.

    2. Some states have outlawed the practice for all but people in financial facing positions.

    My hope is that employers use good judgement and err on the side of not collecting irrelevant information. You don’t need good credit to be a helluva janitor.

    • Comment made by Anonymous on Jan 3rd 2011 at 8:52 pm:

      Amen, Lance. By the same token, do I need to have a good credit score to be a top producing recruiter? It’s mostly corporate America using this practice, not small business.

    • Comment made by Mystify80 on Jul 6th 2011 at 5:56 pm:

      I agree, I was laid off 3 years ago and as a result my credit suffered a few dings. Now I am applying at jobs that are far below my career history. Now as a result of a credit check I have been denies an opportunity at a data entry job. Data Entry for an online sales company.  Really?  My questions is HOW they expect a person to come back from being laid off in times like this when they keep adding more reasons NOT to hire a person. I have 15 years exp in the clerical field but now degree, so now I am not qualified to be even a receptionist. It is so frustrating. I used to work 50 hour weeks, was always on-time, went beyond the call of duty and now I can’t even get my foot back in the door.  Now there is yet another reason not to give me a chance. How is a hard working person who ran into hard time supposed to come back?

      • Comment made by Goodcreditb4layoff on Jan 11th 2012 at 7:54 pm:

        I can totally empathize with your situation.  After being laid off from my last position over a year ago because my job was outsourced to India, I was finally forced into bankruptcy after years of a great credit history.  I am educated in my field, I have experience, with great references.  If it weren’t for the credit check I’m sure I would be employed again by now.  To make matters worst, employers are now using the fact that I have been out of work too long as another reason to deny employment. 

  3. Comment made by Gabriel Gheorghiu on Jan 3rd 2011 at 9:11 pm:

    Since it takes recruiters less than 1 minute per resume to differentiate between hundreds of candidates, they need to use some simple rules. Only the interview can help them understand the “actual merit” of a person.

    In conclusion, you’re right, but Lance and Albert made good points – for some job types and specific industries, credit checks can be an useful differentiator between candidates.

    • Comment made by Anonymous on Jan 3rd 2011 at 10:06 pm:

      I’m not actually talking about the screening process, I’m talking about the hiring process. For instance a client interviews someone they like and they want to make an offer but first they do background & credit check. In those cases where credit is poor, often times the candidate won’t get the offer even if the interview went well. It’s profiling.

  4. Comment made by Abarrow on Jan 4th 2011 at 4:00 pm:

    Thought-provoking and timely post, Robin. It’s understandable and has always been the policy to run credit checks for positions where the successful candidate will have physical or virtual access to funds. On the other hand, what makes your blog important today is that – HOT SCOOP – our economy blew up in 2008 and many “responsible” members of our workforce, from executive level on down, find themselves unemployed, their credit ruined and on the verge of losing their houses. Most of them have worked their entire adult lives until the last two years and want nothing more!

  5. Comment made by Saundra Lee York on Jan 4th 2011 at 4:21 pm:

    Additionally, everytime a prospective employer checks the job hunter’s credit, the job hunter’s credit score gets dinged. I know one woman who is trying to find work, whose credit score has dropped 89 points in the past year ONLY from prospective employers checking her score.

    • Comment made by Anonymous on Jan 4th 2011 at 5:31 pm:

      Wow, Saundra, I had no idea that could happen. I thought that credit checks run a certain way (such as by employers and insurance companies) weren’t actually showing up as inquiries. That’s truly shocking.

      • Comment made by Bill on Jan 5th 2011 at 2:37 pm:

        They do show up as inquiries, but they are soft inquires and they do not affect credit score. It is like when a credit card company that does not have permission to check your score but do to send you an unsolicited offer.

        Additionally, and this is where the story is miss leading, credit scores are not provided specifically to employers. All employees get are the credit reports. These are two different things.

        • Comment made by Anonymous on Jan 7th 2011 at 12:56 pm:

          Thanks for the clarification, Bill. It was my understanding (last time I recruited for a client who ran credit checks on prospective employees) that they do in some cases obtain the score if done so by request. Some employers want the full Monty.

  6. Comment made by crazyoldman on Feb 22nd 2011 at 12:21 am:

    It is plan and simple, it is discrimination. They are prejudging a person because of their credit score and making assumptions, not on the persons qualifications. A bad credit score doesnt mean the person is bad. To me there is no difference than deniying a person a job because the race, religion and etc. Is it fair that some insurance companies base your premium on your credit score, so they say if you have a bad credit score then u have to be a bad driver, its should be based on your driving record, not your credit score.

  7. Comment made by honi b on Mar 15th 2011 at 3:10 am:

    It should be outlawed across the country just like you can’t discriminate race,sex,age,religion,etc. that should be one of them! What did they do back then to make discrimination unlawful now is the question how do we protect ourselves from this lawsuits perhaps?!

  8. Comment made by Ronalde Barron on Mar 22nd 2011 at 9:45 am:

    This is true, why employees are discriminated due to their credit report, even we all know employee are paid since we are facing economic crisis, employees credit report may not be consider on some special case.

  9. Comment made by Still Searching on Apr 25th 2011 at 7:34 pm:

    This practice should totally be illegal. What do they expect? You get laid off, banks wont modify your loan because your not working, what the hell do they think is going to happen your credit is going to suffer. I mean come on its not rocket science!!

  10. Comment made by Jane on Sep 8th 2011 at 5:33 pm:

    I think people need to write their senators and congressmen and try to get a law passed to make it illegal for employer’s to run a credit check on potential employees. You should set up something on your site asking people to do this and to also get in touch with the media and REALLY make a big deal out of this. Certain states are also requiring a credit check for  potential employees, which is crazy, because I know people that work for the state and they have bad credit and the state isn’t checking their  current employee credit reports. Something is wrong here and people need to come together and have a new law put into place regarding this matter.

  11. Comment made by Knr313 on Nov 6th 2011 at 9:09 am:

    We need to really get to the top… I mean PRESIDENT! We need to have this placed thru congress as an outdated practice. Show how we are being discriminated upon, without just cause! We need this to stop now! I believe if this practice is taken away immediately we can have at least half if not more of our countries unemployeed back to work, off the “system” and stimulate our economy. The more back to work the more willing to spend on products! LETS GET THIS OUTLAWED!

    Thanks,
    Kathy Anderson

  12. Comment made by Jroyal7 on Nov 7th 2011 at 12:54 pm:

    I was offered a job at a well established bank. But today got the call informing me they rescended the position due to not paying on my home. Of all my bills that is the only one not paid. Is there a way to pass a law adding this to the list of discrimination?

  13. Comment made by Stampingpooh on Nov 13th 2011 at 5:53 am:

    I totally agree with this. The government is allowing people with bad credit to be treated as criminals, or be thought of as criminals. My credit score has nothing to do with my ability to perform any job. It also has nothing to do with my responsibility behind the wheel of a car. I pay higher insurance rates because i have bad credit….what does that have to do with one another? They just keep making the poor man poorer!! Now, you can’t get your ‘payroll’ check cashed if you have bad credit? What does my credit rating have to do with the employers paycheck? We are being punished and treated unfairly because of our credit ratings. We are NOT criminals….it doesn’t mean we are dishonest…or unreliable in the work force…something needs done to stop this discrimination!!!

  14. Comment made by Stella on Feb 5th 2012 at 6:43 pm:

    Credit check is now the norm, it’s an unfair practice in the workforce when it come to the hiring process. People should not agree to have it done and maybe employers would stop this discrimination when they have no one working for them or sending in their resume for a position with their company or firm.

  15. Comment made by Laurie on Nov 1st 2012 at 7:48 am:

    Since being unemployed for the past 4 years, this practice of running my credit report has cost me the price of a full downward spiral into depression and several attempts of suicide.  It is difficult for us to get by and pay our bills.  Will I ever be employed?

  16. Comment made by Sandy 23 on May 24th 2013 at 7:07 pm:

    There is a bank called SAFRA that they discriminate people that has a bad credit. THEY DON’T CARE and will treat you as trash. SAFRA BANK discriminate people that has bad credit, they are treating people as trash. They will not hire the person and also treat the person as trash. SAFRA BANK SAFRA BANK

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