Credit check can affect hiring
By Mark Williams
Columbus Dispatch
COLUMBUS
Failing to pay your bills could keep you from getting a job.
Frustrated at the reticence of applicants’ previous employers, companies seeking an indicator of their job candidate’s character are turning to credit reports. Some also do regular checks on current employees.
The use of credit checks comes at a tough time for workers whose credit histories have been trashed after they lost a job in a tough economy. Getting their credit back on track might require getting a job, but that could be more difficult with a lousy credit history.
Justin Millay, 28, a central Ohio native who moved to Kentucky with his wife after he lost his job in Columbus, can speak to the problem. He said he thought he had a new job lined up as an assistant manager of a sporting-goods store — until the company did a credit check.
Millay said he knew he had bad credit. “I never thought I’d lose a job over it,” he said.
It’s not clear how often employers and would-be employers conduct credit checks.
A survey by the Society of Human Resource Management in 2010 found that 13 percent of companies conduct credit checks on all prospective employees, while 47 percent do it some of the time. That’s about the same as in 2004.
Others say the use of credit checks is increasing and spreading to jobs that do not include handling cash or confidential information.
Regardless, the issue is capturing more attention.
The U.S. Equal Opportunity Employment Commission had a hearing on the topic in the fall, and in Illinois, as of Jan. 1., it is illegal for most employers to review credit reports when hiring.
A telephone poll conducted in January for Credit.com found that 53.5 percent of those responding favored banning the use of credit checks for employment, while 38.3 percent approved of their use.
In the EEOC’s fall hearing, chairman Jacqueline Berrien said: “The use of credit checks has grown, and at the same time, questions have emerged about the fairness of the practice — whether the results of the credit check correlate to job performance, and whether there are any adverse impacts.”
The human-resource group says the use of credit checks in hiring is limited. Most companies rely on checks primarily for positions that involve handling cash, senior-executive posts or jobs that involve handling confidential employee information.
The group says that credit checks generally aren’t done until after a job interview or offer, meaning that most applicants won’t face a review of their credit report. The credit check is part of an overall background check that can include a drug screen and a review of employment history.
Columbus human- resources consultant Steve Snelson said that, based on his experience, less than 1 percent of candidates are denied a job offer because of their credit history.
Employers look in credit reports for problems such as court judgments, debt collections and lawsuits, said Elizabeth Owens Bille, the human-resource group’s associate counsel. Applicants typically are given a chance to explain problems, she said.
Employers also are looking for details of an applicant’s work background. That has become more important because an applicant’s past employers, fearing legal action, rarely release more than job titles and dates of employment.
What’s not a part of the credit check is a credit score, the number that credit-reporting agencies assign to consumers that helps determine how creditworthy they are.
“There’s a misconception that ... any blemish will cost them a job,” Bille said. “Research has shown that’s not the case.”
Bille said credit checks can be a valuable tool in hiring. A company wanting to hire a senior financial executive, for example, would want to know if a candidate has trouble paying personal bills on time, she said.
Snelson noted that companies can spend six to 18 months of an employee’s salary to recruit, hire and train a new employee. “Therefore, it is imperative to choose the right candidates that have the most potential for being successful and will stay with the company,” he said.