Protecting Employee Credit History: The Arguments Pro and Con
Those who support state and/or federal legislation to restrict employer use of credit information argue that:
- A poor credit score is a "Catch 22," leaving job seekers trapped in a vicious cycle in which poor credit prevents them from getting a job, which leads to even worse credit;
- The use of credit score unfairly penalizes minorities, who may be targeted for predatory lending practices and face other forms of discrimination that harms their credit;
- There is no relationship between a person’s credit score and their character or any job performance issues;
- Medical bills and job loss are responsible for most bankruptcies and other damaged credit; thus, most people with credit problems are in that situation through no fault of their own;
- Credit reports are unreliable and credit information is often inaccurate;
- It may be relevant to consider an applicant’s credit history for a few jobs (such as those in the financial services industry), but employers are increasingly running credit checks on all job seekers.
Those who oppose such restrictions maintain:
- How a prospective employee has handled his or her responsibilities in the past, including personal financial responsibilities, is relevant — something an employer should have a right to know.
- Employers' use of credit history information is not as widespread as those who would restrict credit inquiries claim.
- Employers who do check credit scores are likely to do so only if they consider an applicant a serious candidate, since it costs money to run a credit check. If a credit problem turns up at that stage in the hiring process, the employee may be able to offer a reasonable explanation and still get the job.
- Today more and more employees are likely to have access to customer financial information. If an employee is having financial troubles and may be inclined to engage in risky behavior as a result, that information is relevant for many positions, not just for jobs that are specifically related to financial matters.
- There is no convincing evidence that minorities are being kept out of the workforce disproportionately due to poor credit. The evidence cited by consumer advocates is anecdotal at best.
- Existing law — the federal Fair Credit Reporting Act — already places significant restrictions on an employer’s ability to obtain and use credit information in hiring, while providing safeguards for job applicants and ensuring that they have the opportunity to correct any inaccurate information in a credit report.
Note: The information in this section appeared in the Winter 2011 edition of the Department of Human Rights newsletter, The Rights Stuff. The newsletter includes additional material related to this topic.