A Washington state bill, SB 5827, introduced by Sen. Steve Hobbs (D), proposes that employers be prohibited from obtaining a job applicant’s credit report in its usual background investigations, unless the job is in the realm of public safety or financial positions.
A 2003 study by two researchers at Eastern Kentucky University found no link between an employee’s credit history and negative performance or termination due to dishonesty. Yet, many employers are still using credit reports to evaluate an applicant, even when the job has no link to finance — if a person did not pay off a debt when it was possible to do so, the general feeling is the person may not have a good work ethic or a positive outlook on the job.
Hobbs’ bill seeks to allow employers to look into credit reports only if it has a true impact on the job. For example, if a person has bad credit but must travel often, they may not be able to rent a car; if a person’s job entails money management, many large debts may signal they do not have the capacity to manage money properly.
Privacy and minority advocates are also seeing a civil rights issue within the use of credit reports. Although studies show minorities are more likely to have credit problems or bad credit, it does not mean that minorities are going to use the job to steal money to resolve those problems. It doesn’t only affect minorities applying for jobs, but also those trying to rent an apartment or house, getting insurance or obtaining loans for cars or school.
Hobbs says that the decision of employment should be based on the applicant’s resume — education, experience and skill in that job — not the credit score. "What it’s doing is it’s punishing those in lower incomes struggling to make ends meet," he said.
If a credit report is to be used as a deciding factor, an employer should remember that up to 70% of credit reports contain errors (according to bankrate.com), some of which are major. Although the Fair Credit Reporting Act makes the credit reporting agencies fix any mistakes, the diligence to catch them relies on the individual. Unfortunately, it may take years for some errors to be completely cleared from the record. If in doubt, ask the applicant about any questionable behavior and gauge their response.
Source: Samantha Blaum, NACM staff writer, and SB 5827