skip to content
Primary navigation

How Accurate is the Data

WHat They Say

Legislative Director, Minnesota AFL-CIO in an interview on bills introduced in Minnesota's 2010 legislative session that would have added credit history as a protected class to the state Human Rights Act

"They (the credit bureaus) have no accountability whatsoever to anybody. And so a lot of the time, you have three different major recording companies, and you pull up all three of your credit reports, and nine times out of 10 there is something wrong on each one of them, and they never match."

Partner, Barry & Slade, LLC
in an interview explaining his support for restricting employer access to credit history in the hiring process.

"I think it's 60 percent of all bankruptcies are based on medical expenses, and in something like 80 percent of those cases, the people actually had medical insurance. So the fact that they or a family member may have had severe medical problems which put somebody into bankruptcy- or maybe they didn't file bankruptcy, but they incurred an enormous amount of debt - that has no reflection on the ability of the person to do the job. It speaks to a completely different set of circumstances which were well beyond their control."

Those who support the federal Equal Employment for All Act and efforts to pass similar legislation at the state level argue that not only is a credit report irrelevant in evaluating a job applicant, there's a good chance it is not even accurate. "There are a whole host of problems in the credit reporting industry," says Elwood. "The system is broken."

In his testimony in hearings on the Equal Employment for All Act, Chi Chi Wu cited an on-line survey by Zogby Interactive. The survey found that 37 percent of consumers who ordered their credit report discovered an error, and 50 percent of those were not easily able to correct the error (Zogby Interactive, Most Americans Fear Identity Theft, Zogby's American Consumer, April 2007). Wu notes that the industry's own trade group, the Consumer Data Industry Association (CDIA) has admitted that, out of 57.4 million consumers who ordered their own credit reports back in 2003, almost 22 percent filed a dispute that resulted in an investigation.

Schaubach says she found out firsthand, some years ago, how difficult it can be to correct damaging information on a credit report that is inaccurate. "I had my purse stolen, and somebody started using my checks - even though my checking account was closed - a year afterward. So I started getting these collection calls, and I had to deal with the credit companies." It was, says Schaubach, the most frustrating experience of her life. "You have to contact all three credit bureau, and getting a live person is next to impossible. You have to do dispute letters, and then you just kind of sit around and wait. So in the meantime, if I'd been looking for another job and somebody had run my credit report, they would have said, "well look, her credit's awful.' Nine times out of 10, they're not going to ask you why your credit is like that. They can just say, "we don't want you.'"

The Fair Credit Reporting Act

Some who oppose further restriction on employers' use of credit history argue that existing law - the federal Fair Credit Reporting Act (FCRA) - already places significant restrictions on how and when an employer can inquire about a potential employee's credit. Under the Act, an employer must obtain the applicant's written authorization before the background check is conducted.

If the employer uses information from a credit report for an "adverse action" - such as denying a job applicant, rescinding a job offer, or denying a promotion - the employer must provide the applicant with a "pre-adverse action disclosure" before such action is taken. This includes a copy of the credit report on which the decision was based, an explanation of the consumer's rights under the FCRA.

Then, after the job applicant is rejected or other adverse action is taken, the individual must be given another notice, which includes - among other things - the name, address, and phone number of the employment screening company, and a notice that the individual has the right to dispute the accuracy or completeness of any of the information in the report.

But critics say these protections aren't enough, and cite significant loopholes in the Act. If the employer conducts a background check itself rather than hiring a third-party screening company, it does not have to provide the notice that would otherwise be required. And if the employer tells the rejected job seeker that its background investigation was not a factor in its hiring decision, but other candidates were simply more qualified, the applicant would not be entitled to a copy of the background check to see what negative and possibly inaccurate information it contained.

back to top