• 11
  • August
    2010

People all over the country have been experiencing financial difficulties over the last couple of years. Many have been the victims of job loss, many have seen their mortgage payments jump with an adjustable rate mortgage, and others have fallen behind on their bills because of excessive medical debts. All of these problems have contributed to increasing numbers of bankruptcy filings and an epidemic of foreclosures.

Now, making things even more difficult for some that have been plagued by financial problems, more employers are looking into the credit history of job applicants when deciding whom to hire. According to a survey conducted by the Society for Human Resources Management, as many as 60% of employers may be using credit checks to help make hiring decisions.

While the use of credit checks is nothing new, the frequency with which they are being used has changed significantly. Previous surveys have shown around 35% of employers using credit checks in 2003, and only 13% doing so in 1996.

The survey did not provide any information on why employers are choosing to use this information more frequently, but according to some, they must find it beneficial, otherwise they would not invest the money it takes to conduct the research.

According to Stuart Pratt, CEO of the Consumer Data Industry Association, which is the trade association representing the credit rating agencies, employers may be able to determine a job applicant's level of responsibility by looking to their credit history and seeing whether they have amounts in collections, prior bankruptcies, or previous home foreclosures. He notes, however, that employers would be wise to give prospective employees an opportunity to respond to this information and they should probably only consider it as one factor in making a hiring decision.

In our next post, we will discuss some arguments made against allowing employers to use this information and consider some legislative attempts to limit the use of credit history in making employment decisions.

Related Resources:

Job seekers' latest hurdle: Credit checks (CNNMoney.com)