Could your credit report cost you a job?
Did you know that employers can use credit reports as a way to judge who to hire, fire, and promote?
Well, it’s becoming big news now that the Equal Employment Opportunity Commission is suing test prep company Kaplan over their use of credit histories as a hiring tool, claiming this leads to discrimination against black job applicants.
Unanswered questions abound: Just how far can employers go? Is it legal for them to access your credit score? Could a low score hurt your chances of getting a job?
This is so important that I’m going to break it down for you as clearly as I can. Here’s what you should know (and sorry for all the legal jargon!):
Any prospective employer can pull your credit report.
It’s legal for employers to access credit reports for applicants, and 60% of organizations do, according to the Society for Human Resource Management. By law, they must get your permission, but then they can then use these reports when hiring new employees or evaluating current employees for promotions. Consider yourself warned!
They can see all your financial mistakes.
In general, bad spots like a missed credit card payment remain on your record for 7 years (yes, even one late payment!). And some types of bankruptcy stay for 10 years. Just think of it as motivation to pay on time.
They can turn you down for the job because of your credit report.
BUT, they first have to give you a copy of the report and a summary of your rights under the Fair Credit Reporting Act. After any action is taken (denying you the job or firing you), the employer has to give you additional documents, including a notice of your right to dispute information in the credit report. If they don’t provide it, ask—be polite but firm.
But people are taking action to stop employer credit checks.
Some states, including Illinois, Oregon, Washington, and Hawaii, have banned or limited employers’ use of credit reports in hiring practices. Many lawmakers and citizens feel the practice discriminates against people who are recovering from the recession, and, as in the Kaplan lawsuit, may even be considered racist. Plus, no studies have proven a correlation between a credit report and job performance. As one Connecticut representative pointed out to The New York Times, “Bernie Madoff had a pretty good score.” (Love that line.) For more information about your rights, go to FTC.gov/credit.
Do you think it’s fair for employers to refuse to hire, or to fire, someone based on credit history? And is a credit report an accurate way to measure responsibility?