News & Resources

The misinterpretation of bad credit scores for the unemployed

Oct 17, 2011 Philip Burgess

Unfortunately in this economy, an individual's credit score may be the defining measure of his job application. Companies can choose not to hire an applicant if they have a history of not paying their bills, Time reports. Labor unions and representatives of the U.S. Equal Employment Opportunity Commission defend the unemployed faced with such circumstances, claiming the use of credit card history for background screenings makes it too difficult for a population of people already financially struggling to gain employment. Organizations have been promoting legislation to be passed that would ban the use of credit cards for pre-employment screening decisions, and just last week California enabled a law prohibiting the practice, the news source states. Certain businesses and industry trade groups in support of the method have maintained that credit histories are vital for employer decisions attempting to make the best possible hire, especially in cases in which the job description calls for handling and managing money. According to the Society for Human Resource Management, 60 percent of employers conduct credit checks for certain positions. This recent study may come as a surprise, given the difficult economy. With a 9.1 percent unemployment rate, the recession has created an environment in which Americans are having a tough time finding work and as a result are financially struggling. In turn, this makes it more difficult to keep a good credit score, as the unemployed may be delaying payments and taking out more loans. At the same time, businesses have the right to hire the most suitable and responsible employees. However, because the unemployment rate is so high, many able and ideal candidates may be overlooked simply because they're a victim of an economy on thin ice. Sarah Crawford, attorney with the Lawyers' Committee for Civil Rights Under Law, told a House committee in 2010 that a credit card history doesn't interpret the value of an employee. "A credit report would not explain that a factory worker lost his job when his employer went out of business," she said. "A man's credit [could be] destroyed because he was the victim of identity theft or a predatory lending scam. A woman [could lose] her job and her health coverage before developing breast cancer and incurring astronomical medical bills."