Checking Credit
Sixty percent of employers recently surveyed by the Society for Human Resources Management said they run credit checks on at least some job applicants, compared with 42 percent in a somewhat similar survey in 2006.
Employers say such checks give them valuable information about an applicant’s honesty and sense of responsibility. But lawmakers in at least 16 states from South Carolina to Oregon have proposed outlawing most credit checks, saying the practice traps people in debt because their past financial problems prevent them from finding work.
Wisconsin state Rep. Kim Hixson drafted a bill in his state shortly after hearing from Terry Becker, an auto mechanic who struggled to find work.
Becker said it all started with medical bills that piled up when his now 10-year-old son began having seizures as a toddler. In the first year alone, Becker ran up $25,000 in medical debt.
Over 4 1/2 months, he was turned down for at least eight positions for which he had authorized the employer to conduct a credit check, Becker said. He said one potential employer told him, “If your credit is bad, then you’ll steal from me.”
“I was in a deep depression. I had lost a business, I was behind on my bills and I was unable to get a job,” he said.
Hixson calls what happened to Becker discrimination based on credit history and said his bill would ban it.
“If somebody is trying to get a job as a truck driver or a trainer in a gym, what does your credit history have to do with your ability to do that job?” Hixson said. He said he knows of no research that shows a person with a bad credit history is going to perform poorly.
A credit check can be a useful tool ans smart employers use it as one tool in the arsenal. A bad hire is incredibly expensive and disruptive for a company. As such, any hire is a risk. A credit check just gives a little more insight into that person so that the employer can make an informed decision. I think at my last 4 jobs, I had a credit check, background check, and had to take a personality test of some sort. All of those things allowed the companies to get to know me a little better to see if I’d be a fit.
For some jobs, a credit check reveals little. But for some it is vital. In either case, this is yet another case where government should butt out and let companies run their business. Given how risky hiring can be, why would government want to potentially increase the risk and thus discourage hiring?
I think if you dont collect or handle cash your financial history is no ones business. I remember when i got hired at my last job. my boss told me about a drug test, i said no problem. ill pass. he said, he had a couple of hires that said they would pass. he said are you sure, i wont ask questions if you just admit that you would fail. no harm no foul. they said they would pass and still fail.
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 1946 hrs
I can see where a criminal background check might be sensible in a lot of jobs. I can see where a drug test might be applicable to being a nurse or a pharmacist. But a credit check? You’re not borrowing money from the company. Your credit is irrelevant and should be off-limits. It’s unfair discrimination.
Posted by scott on March 01, 2010 at 2040 hrs
It’s not irrelevant. It goes to character. It should not be the sole determinant, but it should be part of the decision process.
@Scott: You may not be borrowing money from the company, but it is quite possible to steal. Case-in-point: Individuals where I worked were in a position to have valuable consumer goods pass through their hands. The ring was able to appropriate some of the load, hide the transactions and sell them off. They got caught because they got greedy. If they had continued in their original scheme, they may never have been caught.
Point is, credit check may have screened them out earlier.
Posted by Steve on March 01, 2010 at 2111 hrs
My day job is a state-level financial regulator. In the 15 years I’ve been on the job I’ve seen 7 or 8 long-term embezzlement schemes. In every case the guilty individual was a long-term employee whose ethics/morals were implicitly considered above reproach by their employers. Half of them had no direct access to cash but all of them had excessive levels of computer access to the financial records, allowing them to cover their tracks.
In every case an analysis of their credit reports over time revealed a long-term decline in credit rating and long-term increases in delinquency and collection items.
Long-term embezzlement starts as a short-term thing. I’ll move this $100 into my account until my next paycheck so I don’t show up on the employee overdraft list (not a good place to be in the banking world). However, that initial theft never gets repaid and snowballs over years to reach the multi-thousand dollar level.
If your employees appear to be living beyond the means you pay them, you have to start asking the difficult questions. In my experience, employers are far too reluctant to ask those difficult questions.
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2143 hrs
I’m on the side of not categorically. Ever have a job with a company credit card?
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2148 hrs
How does credit = character? That’s what a personal interview is for. There are 10,000 reasons why I might have been late on a payment or had to file bankruptcy. My “character” has little to do with it.
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2153 hrs
Never said credit=character. But it sheds a certain amount of light on it. In my experience, people of bad character are very good at hiding it for the time it takes to interview them. I think the employer should use all the tools at hand.
They would be stupid not to. Some even look at Facebook or Blogs.
Posted by Steve on March 01, 2010 at 2159 hrs
They would be stupid not to. Some even look at Facebook or Blogs.
Note to Owen: don’t bother sending your resume to West Bend School District…
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2203 hrs
Again, November can’t come soon enough.
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2216 hrs
Once again Scott shows that he has a limited concept of liberty. These jobs belong to the employer. He or She is making a contract with somebody he or she may wish to hire. One of the terms of the contract may be to allow a credit check. If the person does not want to share this information, that is their choice. They may be unable to come to terms for this or other reasons but it is the employers job and therefore their terms. Do you think the person should be able to dictate their pay also?
Also, this is not unfair discrimination. Credit is something that somebody has control of unlike color, race, etc.tad
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2229 hrs
Credit checks for potential employment makes as much sense as credit checks for car insurance. None! My credit isn’t the greatest, so I end up paying more for car insurance. WHY? I’ve never missed an insurance premium payment and I haven’t gotten a ticket for a traffic violation since I was 22 (I’m mid-30’s now), no accidents, nothing. Yet somehow the auto insurers, likely using the same data Global Warming “scientists” are using, managed to correlate credit-worthiness to driving habits. It’s a bleeping joke. /rant
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2241 hrs
Credit is something that somebody has control of unlike color, race, etc.
Perhaps the funniest thing I’ve read here.
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2316 hrs
Credit checks are vital for businesses to know they are hiring solid employees. If you can’t manage your credit - how are you going to manage your job?
How would the company know if they could give you a company credit card? A cash advance for a business trip?
Credit checks for car insurance make a lot of sense. Are you going to keep the car maintained? Will you pay your bill? If you have bad credit, you screwed up somewhere. It’s not like it just “happens” to you.
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2329 hrs
If you can’t manage your credit - how are you going to manage your job?
You are assuming a correlation that is not always present, let alone accurate.
Posted by .(JavaScript must be enabled to view this email address) on March 01, 2010 at 2342 hrs
Bill - Bad credit CAN ‘just happen’ to you - think overwhelming medical bills.
Regarding jobs and managing them… according to the small business owners I work for, I’ve been managing their company (about 40 employees) for the last 12 years exceptionally well.
So much for THAT credit-score fallacy.
My company has never run credit checks on any potential employees… we rely on a thorough interview process to weed out lower quality candidates - and we’ve never had a single issue with employee trust.
Oops, there goes another one…
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0015 hrs
“A credit check just gives a little more insight into that person so that the employer can make an informed decision. … All of those things allowed the companies to get to know me a little better to see if I’d be a fit.”
Why stop with just a drug test, credit check, and criminal background check? How about submitting to the following checks:
1. Church attendance & contribution records.
2. Every purchase made with your Pick & Save Savers card.
3. Movie rentals
4. Library recordsReally people, where does it end?
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0606 hrs
Why do we keep looking at it from the end of the people trying to get the job. The job belongs to the employer. Even if checking credit makes no sense, it is the employers job. Why don’t you get that? The person applying has no right to that job. If he thinks the employer is an idiot for checking credit then don’t work for him.
And George - credit scores are completely in a person’s control. Just because people make choices they don’t understand does not mean they were not in control of those choices.
Tad
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0708 hrs
I’ve never met a doctor or hospital that wouldn’t work out a payment plan if you sat down with them.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0719 hrs
As I said, a credit check is one tool among many and it can be useful at times. If a job applicant has a major credit issue because of some major crisis, like a devastating illness, then they should explain that at some point in the interview process. Applicants have to sign a waiver for the company to do a credit check, so the applicant knows it may happen. If I were the applicant, I’d explain it before they saw it. If I were the hiring person, I’d give a lot of weight to the explanation and the applicant’s willingness to be open about it.
Shit happens. We all know that. Be an adult about it.
Posted by Owen on March 02, 2010 at 0800 hrs
Perhaps they should be able to check your medical records, too. It’s also one tool among many. With it they can weed out the people likely to cost them money through the health insurance plan. And if your blood pressure is on the high side you can just be upfront about it during the interview—inherited problem, not a lack of discipline, and your parents lived to be 100! I’m sure they’ll give a lot of weight to your willingness to be open about it.
Posted by scott on March 02, 2010 at 0829 hrs
Scott, I agree with you. There. I said it. If you have a company credit card or deal with sensitive information, the employer might have reason to look. But if not, some things are just meant to stay private. There are a lot of people who are really good at their jobs but are schmucks in their personal lives.
(Owen was complaining that people on the radio talking about this were against it because they had bad credit. Well, we have great credit, so there. Pffffffffft)
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0850 hrs
What about asking a women if she plans on having a child? This could effect your business and how you’re able to staff appropriately. Or she might not come back and you’ll have to train someone else.
What about checking if the applicant has a pre-existing condition that they might expose other staff to or they may have to take sick time for.
What about checking to see what the health of their children, spouse or parent is. Lot’s of medical bills might mean that they might need extra money at some time and might steal from you.
What about genetic testing to see if there is a risk that the employee may at some point be possibly predisposed to a disease?
What about checking what the financial situation is with family members? They might need to help them by stealing from you.
The list could go on and on.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0852 hrs
The military checks your medical history, because it is pertinent to the job.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0858 hrs
There are a lot of people who are really good at their jobs but are schmucks in their personal lives.
Quite true. And thanks for your support, Wendy. But even this comment makes me cringe a little. Does it mean your a schmuck if you have bad credit? Surely we’re not all of the opinion that a bad credit score means that you’re irresponsible or less morally fit than other people. In spite of Bill’s glib and thoughtless comment #18, good and responsible people can and do find themselves having to live down and fix up a bad credit score through absolutely no fault of their own.
Was it Calvinism that held that a person’s godliness and character could be reliably determined by their outward prosperity? I forget. But whatever it was, it’s abhorrent.
Posted by scott on March 02, 2010 at 0902 hrs
I’m with Tad.
The employer should have fewer constraints on what info he decides to use in the hiring process.Might there be a correlation between employer freedom and the number of new jobs created or sent overseas???
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0904 hrs
What’s the limit, Joey? I mean, might there be a correlation between child labor laws and the number of new jobs created or sent overseas???
Posted by scott on March 02, 2010 at 0906 hrs
Perhaps they should be able to check your medical records, too. It’s also one tool among many. With it they can weed out the people likely to cost them money through the health insurance plan
Some employers DO require a physical for employment, and a medical records check. If it is appropriate to the job, and there are clear rules for employment that are equally applied to all applicants, I have no problem with it. If working directly with cash is part of your job, or you deal with finances, then a credit check is quite appropriate. Someone deeply and desperately in debt is certainly a poorer choice for some jobs than an equally qualified candidate who manages money well.
The employer seeks to hire the very best person. They should be allowed to do so. Would YOU hire an accountant who went bankrupts twice and was in debt up to their ears with car and home loans? Would you want the Fire Department hiring firefighters with bad backs or heart conditions? How about cops with bad feet? Bankers with dozens of unpaid bills? Pilots with poor eyesight? Mortgage specialists who are in foreclosure? Of course not.
If it is appropriate to the job, then the employer should be allowed to ask you for the information. You can, of course, refuse… but that might lessen the strength of you resume against others. There are always other jobs you can apply for if you wish. The job belongs to the employer, after all.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0912 hrs
Scott, I didn’t mean that people with bad credit are bad people. I was actually thinking of Bill Clinton when I wrote that. A lot of people think he was a pretty good president, but even his supporters have to admit that he wasn’t of the highest moral character in his personal life.
It’s just unfortunate that there doesn’t seem to be anything private anymore. Yes, it’s the employer’s job to give, but you’re only giving your employer 40ish hours of your week. Where is the boundary between what is your employer’s business and and isn’t?
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0950 hrs
How many of you have seen a credit report?
There is a lot more than the credit score on it. It is a tool, and like any tool, it can be misused by people who don’t understand it. As a landlord, I use them all the time, but you have to exercise judgment.
Someone who continously runs up small debts and does not pay them is probably a bigger risk than someone who declared bankruptcy because they owed a hospital $75k.As an employer, there are better tools available, but I would not want it taken away.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 0950 hrs
Others have mentioned it, and I’ll second it.
Credit, in and of itself, should not be a “killer” for most jobs. (There are exceptions.) But what we’re seeing these days is an inappropriate reliance on metrics which may not be valid measures of the ability to do the job—credit-rating being one of those.
Good interviewers can usually get an excellent feel for someone’s personality, strengths, and weaknesses. Those are usually verifiable by astute reference-checking.
As the regulator (above) said, the badguys are NOT the ones you expect.
Posted by dad29 on March 02, 2010 at 1001 hrs
Just like with CCAP….. I should be able to use all the available data to inform my decision on hiring. I am a compassionate person, and I have the ability to see past flaws. We do not need the government protecting us in this case.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1016 hrs
This is like watching someone use a hammer to pound in a screw: wrong tool for the job.
A credit report is designed and intended to be a tool in assessing an individual’s credit worthiness or risk for the purpose of extending credit. Attempting to use it for anything else means you’re using the wrong tool.
I’ve literally read thousands of credit reports, and one thing I can tell you is that they have an amazing capacity to be misleading and/or inaccurate. A low credit score can result simply from not making enough use of credit. Items end up on credit reports all the time that shouldn’t be there. Quite often a low score can be mitigated by details that are in the report but often overlooked by those reviewing it. And a high score can be just as misleading as details in the report can and should set off alarms but are overlooked because the score is high.
I’ve reviewed credit reports for the purpose of extending credit, and even then there are plenty of instances where a single person isn’t capable of making a yes or no decision based on the report alone. It often requires a team of people to debate what’s on it and use that information in conjunction with a number of other details that aren’t on the report but will impact a person’s ability to repay a debt. The point is that while this tool may seem very useful on its surface as soon as you become familiar with how it actually works you realize that not just anyone should be making decisions based on the report alone. And again, this is using the report for what it was originally intended. Trying to apply those same principles to a non-credit related decision is just lazy. Put down the hammer and go find a screwdriver.
Posted by David Casper on March 02, 2010 at 1323 hrs
I should add that I’m not necessarily in favor of a government ban on using credit reports, but rather simply discourage anyone from using the report for anything other than what it was originally intended.
Posted by David Casper on March 02, 2010 at 1326 hrs
So you think businesses shouldn’t be doing this, but you don’t think it’s okay for people to stand up and tell them they can’t.
Posted by scott on March 02, 2010 at 1334 hrs
To focus on a different angle of this bill…this is the kind of useless crap I’d expect from Kim Hixon. He is truly a rubber stamp and not by any stretch of the imagination a cerebral guy. How he got to office is truly a mystery.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1339 hrs
I should add that I’m not necessarily in favor of a government ban on using credit reports, but rather simply discourage anyone from using the report for anything other than what it was originally intended.
... in other words, (if I may)... a ban is not appropriate, but like all information out there, you have to apply thought to it as nothing is black and white.
Let’s not intentionally mischaracterize someone’s comments.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1342 hrs
If we are to use credit reports for these things, then the credit reporting companies need to be held to a high standard of quality. They should be financially responsible for all errors. They need to give a copy of the report to the prospective employee as well as the prospective employer and if their error caused the prospective employee not to get the job, they should be responsible for the cost the prospective employee suffered because of it.
Insurance companies in many states also use credit reporting services for underwriting. Of course, if there are mistakes, the guy who pays an extra two hundred bucks may never know.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1404 hrs
What I find amazing is employment drug testing. In order to work and earn a wage you must pass, and the goverment takes there cut of the pie weekly. But if you receive assistance you can lay around all day do drugs qualify for every program under the sun and nobody has the right to test you. If the people working need to hold a standard the people on the receiving end should also tow the line.
Some kid smokes a joint on Friday goes back to work after the weekend but for a month he shows positive . A junkie shooting crap in his blood can have all evidence purged from his body in a week.
Sorry for getting off track.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1430 hrs
Tad -
The vast majority of jobs are provided by managers of corporations. The managers do not own the jobs. They have a duty to the shareholders. Corporations are also creatures of the state. Without government interference, there would not be such a thing as limited liability for businesses. Setting rules for companies is well within the law and within common sense.
If companies have a policy of checking the credit report of all employees and use the same standard to fire that they use to hire, including the CEO, they might persuade me that it really matters to them.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1448 hrs
George - you are wrong. Most jobs (64% of non-farm jobs over the last 15 years) are created by small businesses.
Also, the manager is not the employer. The company is the employer.
Also, your strawman argument about setting rules being within the law is pointless. We are discussing whether there should be a rule / law. I argue that employers and employees should be free to set their own terms of employment. Individual hiring is no different than a company signing a contract with a union. If the two parties agree that each new employee will undergo drug testing, credit checks, and a bad-breath check, it is nobody’s business but the two parties.
What is so hard to understand about liberty. If you want to restrain the liberty of the employer to check credit, what is your liberty-limiting principle (i.e. Mill’s Harm principle)?
Tad
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1754 hrs
Most jobs (64% of non-farm jobs over the last 15 years) are created by small businesses.
That number reflects new jobs not current or replacement ones. Large corporations have the majority of employees. The census bureau’s stats say that in 2004, their most recent data, companies over 500 had 56 million employees, those between 100 and 500 had 37 million. Businesses with fewer than 100 employees had about 20 million paid employees.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1843 hrs
and new job applicants are what we are discussing fl.
Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1850 hrs
Small businesses employ just over half of U.S. workers. Of 119.9 million nonfarm private sector workers in 2006, small firms with fewer than 500 workers employed 60.2 million and large firms employed 59.7 million. Firms with fewer than 20 employees employed 21.6 million. While small firms create a majority of the net new jobs, their share of employment remains steady since some firms grow into large firms as they create new jobs. Small firms’ share of part-time workers (21 percent) is similar to large firms’ share (18 percent).
Source: U.S. Dept. of Commerce, Bureau of the Census: Statistics of U.S. Businesses, Current Population Survey.Posted by .(JavaScript must be enabled to view this email address) on March 02, 2010 at 1853 hrs
I agree re - why restrict small businesses in their hiring practices? Certainly as a society we try to force people to behave in a non-discriminatory fashion, but that has it’s limits. Do we really want to increase restrictions in this type of environment? I’d argue against it.
Now if the SBA started restricting loan access based on hiring practices, we’d have something to talk about.
Posted by SBA 504 on March 11, 2010 at 1505 hrs
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