Employers who make hiring decisions based upon an applicant's credit report

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Are they judging you based upon your credit score?

Have you ever applied for a job, got to the second interview, had the discussion about salary and benefits, had a really good feeling about getting the position, only to have the wind knocked out of your sails because the employer needs to check your credit report?  Several months ago, a close friend of mine applied for a position with the US Department of Justice's local Seattle office and after the first interview, she was denied further consideration because of the information they found on her credit report.  They told her (in so many words) that the reason they require a clean credit history is because people who have bad debt can somehow be tempted to do unethical things on the job.  In other words, the content of a person's character is a direct result of their financial condition.  I could not disagree more with this flawed logic. But more on that topic later..

My friend has been unemployed for 8 consecutive months, haven't found full time work in almost 3 years, and has applied either in person or online to over 700 jobs with no success.  I'm telling you her story because my still employed friends keep telling her that many people are in the same position as she is; their unemployment benefits have run out, their home has been foreclosed, and things have reached a critical level financially. 

It truly amazes me how many peoples lives have been utterly and completely devastated by the economic recession and home foreclosure crisis.  We have all heard about how the home foreclosure crisis happened, who's to blame, and what the president is trying to do to help a fraction of those people who didn't loose their home, fight to keep it.  What about the people who must rebuild their lives from nothing because of not being able to pay their bills for all this time?  How will they survive a credit check if they haven't been able to pay their bill at all, let alone in a timely manner?

According to the US Bureau of Labor Statistics, the national unemployment rate is 8.3%.  Nationally, That percentage converts to about 26 million people.  And that's not to mention what economists call the real unemployment rate that includes people who have been forced to take part-time jobs, or seasonal positions, or those who are working jobs that pay way below a living wage, or people who have stopped looking for work altogether.  Those economists say the real unemployment rate is somewhere between 17-20 %!  In my home state of Washington (not the District of Columbia) the unemployment rate is 8.7%, just above the National average.   

In recent years, employers have been trending towards using credit reports to screen out potential applicants who might be untrustworthy or unreliable based upon an unsatisfactory credit history.  According to an article written by New York law firms, Dechert LLP, and Associated Corporate Counsel because of this corporate trending towards using credit reports in hiring decisions, federal regulations are expanding in an attempt to avoid possible discrimination law suits.  In recent months, the The Equal Employment Opportunity Commission has likewise stepped up its enforcement
efforts in this area. For years, the EEOC, like many state fair employment practices agencies, has taken the position that the use of credit reports in employment decisions has a disparate
impact on certain minority groups. Recently, however, the EEOC has become much more
aggressive in trying to curb employers’ use of credit checks.

In an attempt to send a firm message to employers, the EEOC brought a class action suit in December 2010 against Kaplan Higher Education Corp. in the Northern District of Ohio, alleging that the company engaged in a pattern or practice of discrimination by refusing to hire applicants based on their credit histories. The EEOC contends that this practice has an unlawful disparate impact on African Americans. It's not just African-Americans who are feeling discriminated against by this relatively new trend, but all people who were adversely affected by the economic recession.  For Blacks, the situation is obviously much worse.  The unemployment rate for them is somewhere around 20% and that was before the recent economic recession.  A Vermont law going into effect on July 1, 2012 will severely limit the use of consumer reports by employers during the job application process. Joining California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont is the eighth state to pass such a law, with Vermont's arguably being the most restrictive to date. For a full summary of the new Vermont law, click here - http://www.jdsupra.com/post/documentViewer.aspx?fid=4a2b9a29-984d-4000-883e-1f4427f51632

To date, 61 bills in 29 states and the District of Columbia were introduced or pending in the 2011 legislative session. The total number of states that limit employers' use of credit information in employment is now seven: California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington. Washington enacted legislation in 2007, Hawaii enacted legislation in 2009, Illinois and Oregon enacted legislation in 2010. California, Connecticut and Maryland enacted legislation in 2011. In my home state of Washington,


According to John Ulzheimer at http://www.credit.com/, Equifax has chosen to cease selling credit reports to employers for pre-employment screening. Apparently, the profit from selling this type of credit report was not worth the risk to Equifax. There has been a lot of reporting about the trap that potential employees find themselves that starts with them becoming unemployed, leading to them getting behind on their bills, which hurt their credit scores and then, when they finally get an interview, they don't get the job because their potential employer doesn't like the looks of their credit report, which leads to further unemployment and further damage to the credit report.