Do you have a less than stellar credit rating? Is this due to reasons beyond your control? Have you lost your job because your employer went out of business? Was your credit history destroyed because you were the victim of identity theft?
As more employers use credit checks to investigate potential employees, a bad credit history may harm your ability to get a job. According to a survey by the Society for Human Resource Management, approximately 60% of its employer members used credit checks as a hiring tool in 2009. Society for Human Resource Management, Background Checking: Conducting Credit Background Checks, January 2010. Credit information does not necessarily predict job performance or risk of theft in the workplace. Two industrial and organizational psychologists, Dr. Jerry Palmer and Dr. Laura Koppe, conducted a study which included examining the credit reports of nearly 200 current and former employees working in the financial service areas of six companies. They sought to determine if the credit ratings, which covered only the two previous years, were an indicator of how well the workers performed their jobs and of whether they stayed, or were likely to remain, with their organizations. The results showed that a person’s credit history is not a good predictor of job performance or turnover. Http://www.newswise.com/articles/view/502792/.
The United States Equal Employment Opportunity Commission (the EEOC) has stated that rejecting applicants on the basis of financial criteria such as poor credit ratings has sometimes been found to disproportionately exclude minority groups. In fact, on December 21, 2010, the EEOC filed a nationwide discrimination lawsuit against Kaplan Higher Education Corp. alleging that Kaplan’s rejection of job applicants based on their credit history had an unlawful discriminatory impact because of race and was neither job-related nor justified by business necessity.
Never fear; legislation is here! Recognizing the harmful impact that employers’ use of credit reports can have, so far four states (Washington, Hawaii, Illinois and Oregon) have enacted laws prohibiting employers from using credit checks against employees. Even the federal government is stepping up. U.S congressman Steve Cohen of Tennessee proposed H.R. 3149, the Equal Employment for All Act, in July 2009. That bill, which would amend the Fair Credit Reporting Act to prohibit use of consumer credit checks against prospective and current employees for purposes of making adverse employment decisions, except in certain specific circumstances, was re-introduced on January 19, 2011 as HR 321. Hopefully, this bill will pass so that we can be protected from unfair employment decisions based on our credit scores.