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Are Pre-Employment Credit Checks A Form Of Legal Discrimination?

Updated on October 28, 2013

Are People With Bad Credit A Risk To Employers?

Ten years ago I moved from one state to another. After the move I had a difficult time finding employment that paid as well as the job I had before I moved. I went from earning $38K a year to $14,700 a year. I lost over half of what I was making, and I was going to college full time in an attempt to earn my bachelors degree. At the time I had a new car, several credit cards, and a hefty child support payment. I needed the car and I absolutely had to pay child support. Before long, I had a few late payments on credit cards and after a while I was only paying $20 a month on every credit card. This led to the credit card companies raising my interest rates from the low rates of 8.9% to 26.8%. Then there were the late fees, which increased the amount of my debt, leading to over limit fees. These fees added an additional $56 to $68 each month. Most creditors accepted the reduced payment and agreed to my payment plan, but continued to send information to the credit bureaus as being late or not making minimum payments. After six months all of my credit card accounts were sent to collections even though I was making the $20 payments on time every month.

After applying for several other jobs, 23 to be exact, I could not figure out why I was not getting interviews. I went to the Office of Jobs and Family Services and had them check my resume to make sure it was done correctly. I was told that my resume was good, but there are other factors involved such as being overqualified and having bad credit. I had never heard of employers performing credit checks before and asked the gentleman to better explain how my credit history is relevant to employment. His response was that Ohio is an "at will" State and it also allows pre-employment credit history screening to assist employers in determining the character of prospective employees by looking at their spending habits and debt payment history. My poor credit was a direct result of moving and not being able to find employment in a timely manner that paid wages equal to the income I was earning prior to making my decision to move.

Later that evening, I found a credit monitoring service and created an account to see how many of the companies I had submitted an application to had checked my credit. After paying the $20 fee, I learned that all 23 companies I had submitted an application to had done a credit check. Four of them had a written permission form to check my credit as part of their pre-employment screening. The other ninteen companies ran credit histories without written or verbal notification or consent from me to do so. Three of those companies ran a hard credit check, which remained on my credit report for over two years. These credit checks were visible to other employers looking at my credit history allowing them to see when and where I was applying for other jobs.

I checked with my personal and some of my professional references to see if they were contacted by anyone inquiring about my work history and I was told no. The only review of my applications consisted of a credit check and a background check. There were no interviews for any of these jobs or any response in regards to my application. What did happen was some of these companies, four car dealers, a window retailer, two banks, and three retail stores, sent me offers for lines of credit, products, and/or services. My credit is not good enough to be hired as an employee, but it was good enough to be offered credit for a product or service. As a result of the actions taken by prospective employers, I do not provide my social security number during the application process until after an interview has been conducted.

I am assuming that a credit check is not really about character, it is about looking to see how much debt a person has and comparing debt history to work history. Employers are not going to hire a person that is always looking for another job or who moves frequently. Frequent movers are considered to be unstable. They are also not going to hire a person that has several credit accounts that are delinquent and/or are being sent to collections. Employers don't want to have creditors and collection agencies calling their business attempting to collect on a debt. Collection calls present the risk losing revenue from time spent by the employee or other employees having to take collection calls several times a day. Then there is the possibility of the employee having to take time off to go to court to deal with being sued for the debts.

I am sure there is a need for some employers checking the credit of a person being hired for positions that involve high value materials, money, and access to personal information such as social security numbers, banking and credit accounts, or confidential information. While I can understand the point of view of an employer, not every job requires an employer to perform a credit check. Being denied employment because of slow, no, or poor credit is nothing more than legal discrimination. Basing one's character on their credit score is no different than looking at a person of color and deciding that since they are not white they not worth an interview or hiring.







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    • flacoinohio profile imageAUTHOR

      flacoinohio 

      5 years ago from Ohio

      Thank you MissBizzness for reading my hub, it is unfortunate to read that you are now experiencing what I went through just to get a job. This practice should be outlawed, in Ohio it is still allowed. Yesterday, I read a Monster job posting for an Insurance Sales position. The posting was five paragraphs long, the first two were the job description and required experience and education. The third began with a statement that a Pre-employment credit check would be performed. The remainder of the third, the fourth and the fifth paragraphs went into great detail about how much debt and what derogatory credit information contained in your credit report would eliminate an applicant from being considered for an interview. State and Federal jobs have almost identical criterion with the added annoyance of requiring applicants to have a set debt amount limit. The last Federal job posting I was interested in applying for indicated that applicants could not have more than $5000 of debt. I still have $41K just in student loans, I could not apply just because of education loans! Good luck with your job search and take care of your credit, pay your debts, check your credit at least once a year and address any mistakes that may be on your credit report.

    • profile image

      MissBizzness 

      5 years ago

      THANK YOU, THANK YOU, THANK YOU for your detailed, insightful post on your own job-search experience.

      It mirrors my own, in many ways….and it was a great help to see that I am not CRAZY.

      Finding your article and reading it aloud to my family members has also helped them to realize that being employed for long periods of time, although you are applying everywhere CAN be contributed to poor credit.

      My credit is poor because I lost my job at the end of 2008, due to the HR director at my job refusing to acknowledge my FMLA certification. I was also working in an 'At-Will' state…so even the Dept. Of Human Resources told me there was nothing I could do, although they sided with me in the hearing, and I received full unemployment insurance!

      Since then, it has been difficult to cover monthly expenses, and this shows on my credit now.

      They don't care WHY it's poor, they only care THAT.

      Again, thanks for your post.

      Signed,

      Determined and still looking...

    • By Lori profile image

      By Lori 

      6 years ago from USA

      Yes that is are a ridiculous intrusion into your privacy. No one has any business looking at your credit - especially in this economy where you know people were using credit to survive. The USA is being changed into something less recognizable. Citizens are treated like the enemy, and are given a hard time when they least need it.

    • flacoinohio profile imageAUTHOR

      flacoinohio 

      6 years ago from Ohio

      Thanks for reading my hub, the girls. This hub is based on my experience seeking a new job and a second part time job over ten years ago. Little has changed with exception of the use of a hard credit check becoming illegal. Prospective employers can now only perform a soft credit check which does not negatively impact an individual seeking employment. I am not currently seeking employment, but thanks for the tips!

    • the girls profile image

      Theresa Ventu 

      6 years ago from Los Angeles, California

      The credit check is an "option" for employers when hiring employees. Since we can't deny this right , though it won't make sense to them with the recent economic recession, you can should always ask for a salary rate that is within the industry average. They know it but won't volunteer it.

      You can also consider shifting your career where the demand for employment is higher.

      Hang in there. I know you can make this through and come out with great success.

    • By Lori profile image

      By Lori 

      6 years ago from USA

      I totally agree with you. Things are just getting more stupid in general in this country, like most common sense is missing with so many things.

    • profile image

      Angry American 

      7 years ago

      Credit checks were never done for decades even for people working in professions that handled other peoples personal info. Most of those folks were professional and conducted themselves as hardworking and trustworthy employees. Credit checks should be done away with simply because its another way of discriminating against a particular population of people. Is not discrimination against the law? Potential employers are actually breaking the law when the use poor credit as an excuse for not hiring someone when they are clearly qualified for the position that they are applying for.

    • profile image

      StonePost 

      7 years ago

      I agree with your opinion, if the credit check is not needed for the position- it should not have any ruling in making hiring decisions. As you may already know, a company can hire whoever they want based on whatever they see/hear and say that someone "more qualified" got the position if they don't like what they find out about you. Is it morally wrong? YES. Will the discrimination ever end? Not as long as the person hiring has a mindset of what the "ideal" candidate is. Ethically I find it unacceptable to also discriminate against persons who aren't currently employed as well.

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