The practice of major credit card agencies giving credit histories of job candidates to potential employers has come under scrutiny. Many people have complained that they have lost out on job opportunities because of their credit history, despite being qualified for that position.
Use of credit checks by employers has been justified by the need of screening the background of prospective employees. Employee theft and fraud is on a rise, while giving false information to get jobs as well as workplace violence have also been growing. Employers say that in such a scenario, credit checks of employees become necessary for security reasons.
No evidence of credit history linked to security concerns
However, there is no evidence to prove that people who have a bad credit history will commit crimes or breach security while working. Neither has any link been discovered between their performance or tendency to quit and their credit history. The recent recession has taken a toll on the credit history of almost all Americans. Does it mean they are any lesser qualified now for jobs? A large number of people whose credit history has been destroyed without their fault, because of medical bills, layoffs or other such reasons, are not able to get jobs when employers use credit checks to determine the eligibility of a candidate.
Because of these reasons, there have been demands to limit the use of credit checks as the basis of giving or denying a job to a candidate. Some states have already enacted laws to limit the use of credit checks during the recruitment process. There is talk of introducing a similar law at the federal level.
Lobbyists adding to pressure on lawmakers
Lobbyists for credit reporting agencies have been blocking efforts to bring in any such legislation at the federal level as their business will suffer when use of credit checks for hiring is banned. Their arguments mostly rely on the risk posed to the safety of the workplace.
In fact, many credit agencies advertise credit checks as important tools for employers. They claim that credit reports help in assessing the risk profile of the candidate. People whose income does not cover their expenses are more likely to commit fraud because of their financial difficulties, they say.
These claims by credit agencies are hollow, and they have never supported their statements with concrete evidence. It is important that laws for preventing the use of credit checks during a recruitment process are passed soon to restore fairness in the job market.