Rejecting a Job Applicant based on their Credit Score - Discrimination?

Is rejecting a job applicant based on a credit score discrimination? Credit Slips says yes.

From the New York Times, Another Hurdle for the Jobless: Credit Inquiries:

More than 40 percent of employers use credit checks at least sometimes, according to a 2004 survey by the Society for Human Resource Management, up from 25 percent in 1998.

and this lovely assumption from employers:

Business executives say that they have an obligation to be diligent and to protect themselves from employees who may be unreliable, unwise or too susceptible to temptation to steal, and that credit checks are a help.

From Credit Slips:

Based on some of the employers' comments in the article, there seems to be a widespread belief that a tarnished credit report necessarily results from bad decision making and that it is evidence that an employee is unreliable, unwise or too susceptible to temptation to steal.
Where the heck is the evidence for these assumptions? Just because someone has a low credit score or has filed for bankruptcy does not make him or her a shady untrustworthy character. It's much more likely that the person has experienced a job loss, medical expenses, break up of a family, over-the-top credit card fees and interest, or an attempt to avoid home foreclosure. A quick read of the bankruptcy literature will show that.
A couple years ago (2007), I published an article in Journal of Poverty using the CBP data describing the ways in which a bankruptcy on the credit report undermines the fresh start ("Personal Bankruptcy and the Credit Report: Conflicting Mechanisms of Social Mobility"). Over half of the respondents reported that they had been denied housing, transportation, credit, or employment explicitly because of the bankruptcy on their credit report. Respondents were denied jobs in accounting, mortgage lending, and even the moving and packing industry. Others were fired when their employers learned of the bankruptcy: one worked for the Traffic Safety Administration, one as a construction worker, and another as a clerk.
I know that some people are arguing that if the job is not tied to money and finances, the information in the credit report should not be used in hiring decisions. For example, in Hawaii, it is now apparently illegal to pull the credit report until after the job offer has been made, and then the credit check has to be directly related to the job qualifications. I would push further--even if the job has to do with money, the credit report should have no bearing. The fact is, just because someone's credit report is blemished does not mean they can't handle or be trusted with money.

 

I agree. How stupid is that to deny someone a job or claim they are not trust worthy because they got into some financial trouble?

My understanding of security clearances is they will reject someone out of hand for a bad credit score, especially a bankruptcy. Pretty absurd when one sees the various headlines of pedophiles with top security clearances, industrial espionage going on....but lord help you if you defaulted on a credit card?

Well, we know ~50% bankruptcies are caused by medical bills. There can also be simply losing your job in an expensive area and be left holding the bag. Don't forget default credit card rates of 24%, 29%, 32% when one misses a payment. Then there are other stories of a nasty divorce where one runs up the credit cards, people plain getting ripped off by others and then cannot pay their own bills...the list goes on and on, which is why bankruptcy is a civil court issue. It is not a crime to need to declare bankruptcy...(yet).

But in all seriousness, if a credit report shows someone is having money problems, uh, isn't that the reason they are applying for a job in the first place? They need a paycheck?

Another area which is dubious for use of a credit score is buying auto insurance and other insurance. What does driving a car have to do with one's ability to pay off Mastercard, Visa and Discover?

My theory is the big three credit scoring agencies, just want to increase market share, force more purchase of their products. In all seriousness, where are the independent studies correlating with out a doubt if one goes under and is foreclosed on, magically that person can no longer handle being a shipping clerk?

What does this have to do with job performance?

More this latest rejection tactic is yet another example of bad statistics, bad math and beyond belief bad hiring practices used in this country. Denying people a job based on credit scores is decreasing social mobility and opportunity in this country. It is probably age discrimination as well. What is the probability of bankruptcy as one ages and life happens, vs. when one is young and there hasn't been enough time for bad stuff to happen?

Can you imagine trying to rebuild your life under these circumstances?

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About those security clearances

"My understanding of security clearances is they will reject someone out of hand for a bad credit score, especially a bankruptcy."

Dick Cheney's security form: "Sold materiel to Iranian government (on US sanctions list - therefore illegal) while CEO of Halliburton." (Check)

"Sold nuclear materiel to Libyan government (also on sanctions list) while CEO of Halliburton." (Check)

Clearance granted.

Donald Rumsfeld's security form: "Partnered with family of Chinese totalitarian dictator in software company (Red Flag Software)." (Check)

"Director at Swiss energy giant (ABB) when they sold nuclear technology to North Korea." (Check)

Clearance granted.

My oh my, how things have changed since I filled out those neverending forms for Top Secret Crypto and Satellite Clearances!

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DHS

The head, who had the top most security clearance was a pedophile, and they found a bunch in DHS, with top tier security clearances. These are supposed to require beyond belief security checks, interviews with neighbors, polygraph and so on.

DHS, ya know that organization supposed to be dealing with international terrorist rings....pretty stupid pedophile at the top.

But the biggest thing is there are so many engineers out there being marginalized, their jobs offshore outsourced. So, many of these jobs require citizenship (for obvious reasons!) yet all of these engineers will be rejected because....during getting labor arbitraged....some went under financially!

Beyond absurd, engineers are notorious to not even get a parking ticket by behavior.

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Vivek

Vivek Kundra needs a Top Secret Clearance for his job. I know because I had a DHS and DOD clearance before that if you had a prior criminal record you will not get a Top Secret Clearance.
This just shows the corruption in Obama's administration.

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Hiring and Firing

If employers are going to do this to their workforce decisions, will they terminate present employees who don't pay their bills on time because their pay is too low?

Will they also refuse to hire a CEO or top level exec because the last company they managed had to go to the Fed for a bailout, or (God forbid) went bankrupt?
Frank T.

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Frank T.

Job discrimination in Customer service based on credit

I have been unemployed since Jan 1 2009 I have been applying and at first no one was hiring, 2ndly I am a little physically diabled, now that some companies are hiring for the type of cust serv I do they are doing credit checks. I currently have bad credit and cannot pay anything but my bare nesessities, my cc are in default, cell, home everything and it looks glum for me. is there any hope of laws especially in CO changing regarding this credit chk crap. I am very scared and dont want to loose everything.

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Sammy, I hear ya

It is beyond absurd that companies are doing credit checks on people wanting a job. Of course they are in financial trouble, why else would they be applying for work?

We've written about that here, but this site is an economics blog, so beyond giving voice to people, we can't actually do much. That's why we are here though, raising hell on economics and policy.

The best thing you can do probably at this point is to write a personal letter to your Congress representatives, Senators, your State Senators and Representatives and your governor on the abuses of credit scores.

This has come up and the lobbyists beat back attempts to disallow these sorts of abuses of credit scores to date.

But considering it's 1 in 6 Americans needing work, of course the cannot pay their bills and of course their credit score is getting hurt. Duh. To improve their credit score they need a damn job.

It's a beyond belief catch-22 and the government should stop these abuses.

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Credit Score for a Job ??

To who ever invented this. Just because you have a monetary pention for the rest of your life and don't have to worry about loosing your job. Does not mean the rest of the Americans, Tax Payers, the ones that pay your check have to sufer because your STUPID idea. And the ones who aproved are worst than you. I pray that you or one off yours see them salf in the same situation we see our self because your breleant idea.

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Enployers look at the report

Employers actually look at your credit report, not your score. Which means if you've just started building your score, and it's low simply because there's nothing in your report, you have nothing to worry about. But in cases like Sammy above... it true that seeing so many things on a credit report will make any employer question the prospect's ability to make good decisions.
As for the credit score... that's full of crap. I've been earning a steady income, paying everything on time, have no negative records and no loans at all, and yet, my wife has a score 100 points higher than mine! She has never had a job, I've been paying for everything ever since we graduated from college (when we got married)! That makes absolutely no sense to me... I've been doing everything that I find online on blogs like www.creditrepair.org but still, my score is barely moving up. Naturally, I'm not going to spend any money and hire a credit repair agency because I simply see no reason why they'd do a better job than me since I have no negative records to begin with.

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Credit Score

I've been trying to improve my life under these circumstances its not just future employers But also some states prevent you from making something out of your life after mistakes or job loss, that has ruin your credit, the St of Maryland prevents you from getting a business license if your credit history is bad, This is why the home improvement issue is so bad with people working with out a license's if my credit issue had nothing to do with me getting a license I would have a license, All I know when people are down and out and are hit hard in life no one cares and we always have to pay by cash or twice as much as someone who's credit is good, To me that is Discriminating and its just not right.. I don't expect anyone to give me anything that I have not worked for its funny how car makers and banks can get a bail out but what about the people who worked hard to build this country.. wheres there help where's my help Mr President...... it just makes me sick but that's OK I'm an a American and I will make it thru..

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Walmart job rejection

I just came back from a job interview at Walmarts. The interview went well and the first interviewer said she had to plug in some numbers and then I would have a second interview. No such luck!

I am slightly disabled and have a low credit score due to medical problems with my husband and myself. We also had to short sale our home last year.

Back to walmarts,

About 5 minutes went by and the first interviewer came by and stated there are more people to interview for the job and based on the scores they would be calling people. I knew the minute she said this that I will not get this job due to my credit score. Before the interview when we were walking to the area she was to interview me she told me they were four people short and really needed people.

This is so unfair; there seems like something could be done about this. I may as well forget about looking for a part time job. The reason I need one is to pay some of these bills on my credit report. Thanks alot Walmarts!

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Credit score discrimination

I get favorable treatment because I have a high credit score (surpise -- I don't need it) and I understand that people with low credit scores have to pay more for car insurance. It seems wrong that your money is worth less than mine in the insurance market -- it seems a scam to punish the poor. FICO has nothng to do with driving skill or loss risk. In fact, those with high credit scores may have greater risk because thy have more to lose. FICO -- how about RICO?

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Frank T.

We must do something about

We must do something about this ridiculous assumption. I am 57 years old, and have always worked and had a great credit score until the layoff and medical bills of my son and husband. We filed bankruptcy and now are losing our house in a short sale. I can't find a job anyway due to the age discrimination. I have been a teacher and have tons of experience in mortgaging. This is a travesty. There MUST be some way to defeat this? ANY IDEAS???? Otherwise, I'm considering baglady for a job, and don't know if that check credit for this either.

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age discrimination ideas

The first is to scream from the roof tops about it. The second is to contact organizations who combat it, and beyond the AARP, which I believe is pretty "corporate", making money off the > 55, I'm not sure where. Try private teaching and substitute teaching and then plain look for places where you see older workers and apply there.

Bear in mind, last month there are 4.7 people looking for every job out there and that's only the officially unemployed, the truth is it's more like 6 or 7.

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