I noticed a news item from 2010 on how Oregon is banning credit checks by employers save for a few exceptions like banks and credit unions, etc., where employees are routinely handling cash. The thinking is that there’s no difference in performance amongst employees with good credit vs. poor credit and it’s an overstep of employers to be peering into the personal credit histories of perspective employees. While most Americans find the practice of being denied a job based on their credit to be deplorable, there must be some merit to the practice or else companies wouldn’t be spending the money to check it during the interview process, right?
Arguments for Denying Jobs to Applicants with Poor Credit
- Credit score is one of the few measurable factors employers can legally obtain to discern between higher and lower risk candidates. A single day of interviews can’t possibly paint a full picture of what a candidate may be hiding, but a numerical credit score generated by a third party can help raise red flags about an employee’s financial problems before they get in the door.
- Let’s face it, employees steal. They steal from their employers all the time. Perhaps it’s just pens and paper or perhaps they’re putting office furniture and electronics on the dock and walking out the door at night with valuable merchandise. Wouldn’t you think this is less likely to occur with someone with strong credit versus a credit risk?
- Many jobs have a financial management aspect to them – Certified Financial Planners, cashiers, bank tellers and such. Perhaps it’s running a departmental budget or perhaps it’s a purchasing role. In any event, if someone can’t demonstrate competence in managing their own personal finances, why would an employer want to subject themselves to the same performance? Generally, people tend to take even better care of their own affairs than how they handle work, so isn’t this a key indicator?
Arguments Against Using Credit Checks for Employment
- This just extends a vicious cycle for people who were laid off, fell on hard times and ended up wrecking their credit to get by. While they may be good candidates and perfectly employable, until they are employed again, they can’t start deriving an income and fix their credit! It’s a chicken or the egg situation, but with a real person on the other end.
- Many would argue that aside from the jobs mentioned above, creditworthiness is as irrelevant to the job as whether or not one is married or divorced, a virgin or promiscuous, or what religion they adhere to. While these factors may result in different behaviors and thought processes, in the grand scheme of things, they shouldn’t really affect performance on the job, right? Screening for those other factors is impossible or illegal, yet we screen for credit-worthiness.
- What do you do if someone’s credit score drops while they’re employed? Fire them? Is it like a failed drug test? Since the notion is absurd to fire a perfectly good worker well into a job due to an occurrence in their personal life, why is it appropriate to not hire them in the first place?
Where Do I Stand? It depends on the job. It may sound like a cop-out, but seriously, some jobs may have a very strong correlation between performance and personal financial credit-score, whereas others are totally irrelevant. As an employer, I’d probably like to retain the capability to check for this, but in many cases, I probably wouldn’t use it as a measure, or even pay for the credit check. Prospective applicants should use a credit score estimator at a minimum to know where they stand before applying.
Both sets of arguments are sure to stir some emotional responses, but I’d love to hear your objective views of the situation, any personal/career examples, and whether you think it should be legal or illegal to screen applicants for creditworthiness in the workplace.
{ 16 comments… read them below or add one }
You failed to mention that many folks have faced personal bankruptcy due to medical issues. It hardly seems fair to make them “unemployable” due to this. Companies are lazy about doing due diligence on new hires. That’s why they want to hold on to this cop out of a measurement.
From a humanitarian standpoint, totally true. From an employer standpoint, red flag. Right, wrong, or indifferent, if you were an employer and knew that a candidate had an illness so severe that it wiped out their personal finances, would you pick them with 10 other similarly qualified candidates in line?
Darwin,
First of all, an employer has no business knowing about the previous medical history of employees. That’s private. How far will they be allowed to go? They are offering a job, but not in exchange for knowing so many personal details. If the employee doesn’t do a good job he/she will get fired.
Put yourself in an employer’s position for a minute. You know you wouldn’t hire a seriously ill employee that won’t end up showing up to work for your own business; why do you think an employer should? Granted, there’s what’s legal, what they have “no business knowing”, but if there are dozens of similarly qualified candidates without this risk, why would a rational employer hire them?
Michael, I totally agree.
Just because someone has been sick in the past doesn’t mean they’ll be sick in the future. And even if this were to be the case, it’s unlawful and unfair to discriminate like this. It could even be that it was their kid, spouse, or parents who were sick, and they had to provide financial and/or personal asssistance to them.
–Besides, even the healthiest looking employee is not safe from getting an illeness like cancer for example. No one is safe from this. I’ve witnessed it myself. That person with all the medical bills was once a healthy and with good credit.
As a general rule, I do not think employers should do a credit check. I think it is an invasion of privacy. Along time ago (1975), I interviewed for a position with Electronic Data Systems (EDS). Ross Perot ran it then. He had a n eight page (double sided) detailed application that asked about you debt, savings and other personal questions. He also was against any facial hair. I decided I would not go to the next step because I did not want to shave my mustache, or move to Dallas. No regrets.
That’s strange, no mustaches? These days, sounds like a lawsuit. Women sue because of comments on their attire; religious lawsuits that prohibit prayer or burkas, etc. It’s a new world!
Tough call on this one. I know the Fed. does security check on sensitive positions. That’s probably too costly for regular employer to do. I would do the credit check for sensitive positions and if there are any credit issue see if it can be explained.
Agreed. That’s a tough call, but necessary for some positions with fiduciary responsibility.
It’s a tough one, but with SO MUCH competition, all else being equal, as an employer, wouldn’t you naturally choose someone with a 750 credit score than a 600?
No, because that doesn’t tell you the integrity and other qualities of the person. The individual with the lower score could have very good reasons for it, so it would be unfair to judge based on that.
It’s the lack of information (since so much is protected) that forces an employer to discern potential risks. The same could be said of drug users, right? I mean, I have friends that are VERY high performers, very well compensated, etc who drink their face off, smoke weed, etc on weekends. Dumb, but they never grew up. They work hard, party hard. But upon entry, an employer tests for this. It’s a risk. There are always exceptions, but when there’s mass competition out there for talent, why wouldn’t an employer want to guard against as many red flags as possible?
To bad they won’t ever make the same requirements for politicians…
Considering 35% of the FICO score comes from payment history, I would say credit could be a useful metric. Even if you have large, outstanding balances you can still attain a responsible score as long as you are paying your bills.
Now the question is – does paying bills on time directly translate to completing work assignments on time?
Bad things happen to people all the time. Some of these things affect them financially, things that can cause a blow to your credit by not being able to pay your bills on time. You really wanted to, but ____ happens. It’s not great to feel you don’t have control over them, and unfair and unlawful to get discriminated against when looking for a job to fix them. It can happen to any of us. It’s not like if you went to rob the liquor store.
I laughed as I read the section of this article saying people with poor credit may be more likely to steal. I worked for a company once who had uncovered a person stealing several hundreds of thousands per year for five years. On the day she went to prison she had perfect credit. People being behind in their bills could mean many things in these difficult times. Being in a tight spot financially does not make someone more likely to steal. I have known many people with problems financially who would never think of stealing anything from anyone
Hi Dawn, your example is an anecdote. Before you laugh, what does the evidence point to? Is it plausible?