Bad credit costs employment offers

March 22, 2010 at 12:00a.m.

Baltimore Sun

BALTIMORE

Facing unemployment in a dismal economy, Vernita Humphries of Randallstown, Md., was elated when she landed a job last year. But just days before her start date, the chief financial officer telephoned her personally to rescind the offer.

Her bad credit, stemming in part from a divorce and the cost to care for her mother after a stroke, had come back to haunt her.

“It was like a real bad feeling in the pit of my stomach,” said Humphries, who worked in payroll for 35 years and couldn’t fathom what hadn’t checked out in her background. When the company indicated that her bankruptcy seven years ago prevented the hiring, she said she “was really taken for a loop.”

Employers’ use of credit histories to screen applicants is turning into one more barrier for the nation’s unemployed — about 15 million people — many of whom end up with tarnished credit when they lose a job and struggle to pay bills, credit cards and household expenses. Critics of the practice say it perpetuates a cycle of joblessness and hinders economic recovery.

That has stirred a movement, supported by consumer and worker-advocacy groups, to clamp down on credit checks by employers. In 16 states, lawmakers are proposing legislation to limit use of credit checks to hire or fire, while legislation is pending in Congress that would ban employers from hiring and firing based on creditworthiness. Proponents say credit reports can contain errors and, even when accurate, can be an unfair and discriminatory judge of worker ability.

Sixty percent of employers surveyed by the Society for Human Resource Management said they conduct credit background checks for job candidates, with most employers running checks only on selected applicants, rather than all. About half the employers in the January survey said they typically review six or seven years of history. The top reasons given by respondents for turning down candidates: outstanding judgments, accounts in debt collection and bankruptcies.

Employers and business groups have come out against efforts to limit credit checks, saying they need to know the financial backgrounds of people working not only in banks and other financial institutions but in stores, restaurants, hospitals and customers’ homes.

Opponents have testified in legislative hearings that such limits would deprive companies of a valuable screening tool. And some argued that employees and applicants are already protected under the federal Fair Credit Reporting Act, which requires an employee’s consent before credit can be checked.

Marie Payzant, a 52-year-old single mother and entrepreneur who’s run several small businesses in Baltimore over the years, said she has experience from both sides of the employment line.

Payzant owned the A Bit of Zen boutique in the Rotunda shopping center in Hampden, where she sold apparel from around the world until closing last March. She said she discovered one or possibly two former employees stealing from her, though she never was able to bring a case against them.

She’s not sure now whether running a credit check would have given her any more insight at the time or stopped her from hiring those employees. But she blames losses in the business, in which she had invested all her savings, for ruining her own credit.

And now, Payzant has found herself unable to get a job; she’s been turned down for positions in stores and restaurants. To make car and condo payments, she has resorted to selling her furniture and other possessions online. She also put her truck and condo up for sale and doesn’t know where she will move.