In a recent op-ed piece written by Massachusetts Senator Elizabeth Warren and Tennessee Rep. Steve Cohen, they discuss the practice of employers requiring credit history background checks when screening applicants for employment.
Use of Credit Checks in Hiring Process
Research by the Society for Human Resource Management shows almost 50% (to be exact – 45%) of employers check credit history in their recruitment decision-making process. This practice affects applicants at every level: entry-level, mid-level, and higher-level.
What’s the point of requiring a credit check for employment? Why are so many companies checking credit histories?
Well, the usual reasons are: financial management and job performance concerns.
Will the candidate manage the company’s finances effectively? Will she/he show up to work on time daily?
Many hiring authorities believe these concerns are addressed with a credit history review. For instance, if a person manages her/his finances effectively, she/he can manage a company’s finances effectively. If a person pays her/his bills on time, she/he will show up to work on time.
Do you see a connection? Be honest!
What these reasons don’t take into account is the following:
Sometimes, a poor credit history results from challenging life circumstances – addressed in Warren and Cohen’s piece.
“Bad credit can happen for a lot of reasons, but today many people have bad credit through no fault of their own. Illness, job loss, divorce or the death of a loved one can plunge a family into unexpected hard times.”
Many people kept up their credit – until their circumstances changed. So, bad credit doesn’t determine the character or performance of the person considered.
Still, this hiring practice has become a common one. A common one affecting the people who are really in need of a job – poor, unemployed men and women.
The thing is:
How can people re-build their credit if they can’t get a job? How can they become debt free without a source of income?
They can’t. It’s one of those Catch-22s.
What happens is debt increases. From there, their credit reports become ones of poor history.
Not every job applicant on the market now volunteered their credit history for a bad hit, but it happened.
Let’s consider the long-term unemployed. It’s only fair on this blog, right?
When people join the ranks of the unemployed, they experience a financial strain – a loss of income. A loss of income affects peoples’ abilities to pay their bills the way they did prior to the hardship.
Which results in what?
Warren and Cohen: Credit Checks Are Discriminatory
With this in mind, should candidates be rejected for jobs because of a less than ideal credit history? Warren and Cohen don’t think so.
“For hardworking people struggling to make ends meet, the only way to get back on their feet is to find a good job and earn a paycheck. But even when they are able to sell their homes—often at a loss—or after they are forced to close their business’ doors or find temporary work, that bad credit history continues to haunt them.
“And despite the often-desperate effort to find a job, many employers are unfairly shutting the door on applicants with less-than-stellar credit. We should call this what it is: discrimination.”
Warren and Cohen’s argument is:
This hiring practice is a form of discrimination against the economically disadvantaged. It affects a job seeker’s ability to land a job she/he is qualified for.
Recommendation from Warren and Cohen on Discriminatory Credit Checks
They’re seeking to ban employers from checking the credit history of job candidates except in relation to high security clearance jobs, for instance – by the re-introduction of the Equal Employment for All Act.
This act “makes sure that hiring decisions are based on an individual’s skill and experience—not on past financial struggles. Americans should be able to compete for jobs on their merits, not on whether they have enough money to pay all their bills.”
Getting Americans back into the workforce can’t be done when there are discriminatory practices, such as credit checks, in place. As a job seeker, I’ve never understood this practice.
Is it fair to require this for employment – especially when the position has nothing to do with managing organizational budgets? How can someone’s credit history determine whether she/he is a good hire – or bad hire?
A lot of personal information is obtained when credit checks are required. Access to this type of information in hiring only leads to recruitment bias.
Those in hiring positions must be deliberate about hiring people according to character and ability as opposed to their financial status.
Hiring in this manner won’t negatively affect the quality of potential hires.
There are many qualified, hardworking professionals on the market and ready to work. They just can’t secure a job because of bad credit.
The Catch-22 mentioned above is real.
You can read the full op-ed piece by clicking the link below:
Senator Elizabeth Warren and Representative Steve Cohen, It’s Time to Stop Employer Credit Checks │ Time
Disclaimer: This article contains outgoing links to the works of others on the following websites: Society for Human Resource Management, Elizabeth Warren’s Senate Page, and Time.
P.S. What are your thoughts on the use of credit checks in the hiring process? Please share below.