States may ban credit checks on job applicants

ANNAPOLIS, Md. -- It's hard enough to find a job in this economy, and now some people are facing another hurdle: Potential employers are holding their credit histories against them.

Sixty percent of employers recently surveyed by the Society for Human Resources Management said they run credit checks on at least some job applicants, compared with 42 percent in a somewhat similar survey in 2006.

Employers say such checks give them valuable information about an applicant's honesty and sense of responsibility. But lawmakers in at least 16 states from South Carolina to Oregon have proposed outlawing most credit checks, saying the practice traps people in debt because their past financial problems prevent them from finding work.

"These days, you almost expect people to have credit problems to a certain degree," said Chris Biaggi, president of All-Western Mortgage in Las Vegas. "With the current economy and the way the housing market is in this town, people's credit is not necessarily a reflection of how they'll do their job."

Wisconsin state Rep. Kim Hixson drafted a bill in his state shortly after hearing from Terry Becker, an auto mechanic who struggled to find work.

Becker said it all started with medical bills that piled up when his now 10-year-old son began having seizures as a toddler. In the first year alone, Becker ran up $25,000 in medical debt.

Over 4½ months, he was turned down for at least eight positions for which he had authorized the employer to conduct a credit check, Becker said. He said one potential employer told him, "If your credit is bad, then you'll steal from me."

"I was in a deep depression. I had lost a business, I was behind on my bills and I was unable to get a job," he said.

Hixson calls what happened to Becker discrimination based on credit history and said his bill would ban it.

"If somebody is trying to get a job as a truck driver or a trainer in a gym, what does your credit history have to do with your ability to do that job?" Hixson said. He said he knows of no research that shows a person with a bad credit history is going to perform poorly.

Under federal law, prospective employers must get written permission from applicants to run a credit check on them. But consumer advocates say most job applicants do not feel they are in a position to say no.

Most of the bills being proposed this year resemble laws in Hawaii and Washington that prevent employers from using credit reports when hiring for most positions. The laws contain exceptions in cases in which such information could be relevant to the job -- for example, if the person is applying to work in a bank or an accounts-payable office.

On a national level, Rep. Steve Cohen, D-Tenn., introduced a similar bill last summer in Congress, where it is still bottled up in committee.

Rep. Dina Titus, D-Nev., said she thinks employers should have access to relevant information that can help them hire the best workers. However, businesses need to understand that a credit score may not be the best way to measure an applicant's talents and potential, she said.

Titus said many Nevadans have seen their credit scores downgraded during this economic crisis through no fault of their own. The state has a higher-than-average foreclosure and unemployment rate.

Even though more companies are using credit checks, only 13 percent perform them on all potential hires, the Society for Human Resources Management's most recent survey shows.

Michael Nigro, president of Nigro Construction in Las Vegas, said he didn't check the credit history for any of his 15 employees, but he could see where it might be a valuable tool for employers.

"If I was interviewing a candidate and saw he had an extensive amount of debt, could he be a potential problem? It depends on what kind of job you're going for," Nigro said. "It says a lot about people. We don't focus on that. We focus on experience."

Biaggi of All-Western Mortgage said he's tightened "quality control" at his company, taking steps to make sure loan officers verify accuracy of borrower information on loan packages. These are desperate times and people do things they might not normally do, he said.

Review-Journal writer Hubble Smith contributed to this report.

Trending topics:

• Hubble Smith
• credit check
• credit history
• bad debt
• collection

Comments

Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

1. nathan.nichols Mar. 2, 2010 | 9:35 p.m. Report Abuse

   Not only are your credit scores used to justify taking more money from you ie: higher interest rates, but now they are being used by insurance companies to charge you higher premiums, and banks to justify refusing to allow you to get a checking or savings account. Even if you've had no NSF problems or carry high balances.
   I just moved to another state and both of these things happened to me. I lost my home in Nevada due to loss of job. The state I moved to uses your credit score for EVERYTHING! And on top of it, they don't tell you their pulling a credit report before they do it, which I thought was illegal as well.
   People need to flood their congressmen and senators to force them to ban this practice! Your credit scores have nothing to do with your liability rating for insurance, or your work performance. Everyone has bad credit right now, unless your one of the lucky few that still has a job.
   Write your letters NOW!

2. Gladys.Kravitz Mar. 2, 2010 | 2:30 p.m. Report Abuse

   Listen up folks!! Credit Scores do NOT represent the "stability" or the "honesty" or the "integrity" of ANYone!!! Banks used credit scores to make mortgage loans... yeah, that really worked out. Some banks used nothing but credit scores for small business loans...took a BATH.
   
   I'm ALL FOR accountability!! The problem is that credit scores are not "accountable" in return! Ever tried to get an error fixed? It's a nightmare. Ever had something reported in error? It's a nightmare!
   
   Is this really the value of a human being now? The "scale" by which we are all to be judged? Like I said, I'm all for accountability, but WE the people do NOT have control of our credit scores!!! No one does!!!
   
   I was in banking for over 30 years and I have seen this whole "credit score culture" evolve into this multi-headed monstrosity. Equifax, TRW, Experian.
   
   It's a total mess, and an Orwellian nightmare. Trust me, I know for a fact. It's only going to get worse if we don't try and kill it NOW.
   
   I'm a complete Conservative politically but I am in complete agreement with the liberals on this one. Credit scoring should be outlawed and the information should not be legal to use.
   
   There is a better way to judge people's integrity (for employment) and creditworthiness (for loans)...
   
   It's call due diligence and analysis, and checking with former employers. Checking tax returns, verifying financial statements, you know, DO IT THE OLD FASHIONED WAY. NOT use some giant credit scoring bureaucracy.

3. Roger Mar. 2, 2010 | 1:21 p.m. Report Abuse

   SmartSystem...sure a consumer can place a statement on their credit file to explain derogatory ratings but it does nothing to change the score.. and many businesses use an automated system to qualify applicants that doesn't read or search for statements.. score below a certain level and your cooked..statement or not..

4. Gladys.Kravitz Mar. 2, 2010 | 10:59 a.m. Report Abuse

   @ban grades
   
   I am most certainly NOT a leftist. I am FOR testing in schools, work, or anyplace else that it matters. But individuals do not have total CONTROL of their credit score!
   
   There can be mistakes! (ever tried to get that fixed? good luck)
   
   You have NO control over your credit score for the most part. Therefore, it's nothing but a BIG BROTHER monster that is out of control!! The banks all made "stated income" mortgage loans based on credit scores... that sure worked out didn't it? CREDIT SCORES ARE BOGUS and the whole system needs to be dismantled. It's a monster and it's nothing but a quagmire of muck.

5. SO? Mar. 2, 2010 | 10:52 a.m. Report Abuse

   The credit scoring system is INDEED a scam!!! If you own a business, and default on your loans, such as the Fertittas and the Herbst, your credit score is not impacted. However, if you are a low end employee- layed off from work, like all the employees at Stations and Primm, and you have trouble paying your bills as a result, you're a deadbeat!!!!
   
   Meanwhile the Fertittas and the Herbst boys aren't paying on their BILLIONS in debt, still flying around in their Gulfstreams. Their personal credit scores are NOT impacted.
   
   Meanwhile, the furloughed cook from Primm and the out of work bartender from GVR are looking for jobs, and now their credit scores are lower and they can't get one or at a mimimum they are perceived to be "bad" or "un-trustworthy" or "irresponsible".
   
   I DARE ANYONE TO TELL ME SOMETHING IS NOT WRONG WITH THIS PICTURE!!!!!

Read All Comments