• 13
  • August
    2010

In our last post, we talked about the growing trend of employers utilizing a job applicant's credit information, including bankruptcy filings and foreclosures, when making hiring decisions. In this post, we will look a little closer at some of the arguments against using this information and see how various legislatures are responding to the issue.

While some have argued that examining credit histories may provide relevant information about a potential employee's level of responsibility, others argue that using this information is an unfair use of information from an individual's private life and may be wholly inaccurate as well.

According to Ben Woolsey, the director of marketing and consumer research for CreditCards.com, credit information isn't really a substitute for a character reference, for which it appears some employers are using the information. While some of this information could be a sign of financial irresponsibility for some, it is impossible to know why someone experienced a certain financial setback. Consequently, making a hiring decision based on incomplete and possibly misleading information hurts both employers and employees.

The growing use of this information comes at a bad time for many people. In the last few years, we have seen the effects that sudden job loss or unexpected medical bills can have on otherwise very responsible individuals. Medical debts in particular have become a problem for many. A serious illness can quickly drain a family's savings leading to a bankruptcy filing, or even the loss of a home.

Interestingly, while there have been a growing number of companies using credit information, there has also been a number of legislatures taking action to prevent or limit the use of this information in making hiring decisions. So far, that states of Hawaii, Oregon and Washington have passed laws limiting the use of the information. Illinois is also close to finalizing a law that would limit the use of credit information to only those circumstances where an employer can show the relevance of that information to the job duties.

As time goes on, we may see even more laws addressing this situation. Sixteen states and District of Columbia have similar bills pending, and there is also pending legislation in Congress.

Related Resources:

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