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