The Types of Jobs where your Credit History Matters

I have posted previously about how potential employers often run the credit histories of potential employees as part of the decision making process on whether to hire the potential employee.  A recent poll shows how prevalent this practice really is.

The Society for Human Resource Management (I bet they throw one heck of a Christmas party!) recently polled its members regarding whether they utilize credit reports during the hiring process.  47% of those polled indicated that they run a credit history on at least some candidates and 13% run a credit report on all potential employees.

But what are the types of jobs where employers want to know about your credit history?  The top such jobs are those that include a fiduciary or financial responsibility (I once represented an airline pilot that could not change to a bigger and better airline because of a ding on his credit report - airline pilots get to use the company credit card and they thought he was too much of a risk).  Other jobs where credit reports are often used are top level jobs (i.e. CEOs, CFOs, etc.) and those with access to either highly confidential or highly sensitive information.

What types of bad credit harm potential employees' chances the most?  Judgments top the list (who wants an employee that gets sued a bunch?!) as well as bankruptcies and outstanding collection items.  A high debt to income ratio also appears to be a red flag for employers.

So, if you are planning on applying for one of the types of jobs listed above, you'd better check your credit report first and fix/correct/pay anything you can.

Vermont passes legislation to limit use of consumer reports by employers

A Vermont law going into effect on July 1, 2012 will severely limit the use of consumer reports by employers during the job application process.  Joining California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont is the eighth state to pass such a law, with Vermont's arguably being the most restrictive to date.  For a full summary of the new Vermont law, click here - http://www.jdsupra.com/post/documentViewer.aspx?fid=4a2b9a29-984d-4000-883e-1f4427f51632

Could it be? Equifax allegedly stops selling credit reports for employee screening

According to John Ulzheimer at http://www.credit.com/, Equifax has chosen to cease selling credit reports to employers for pre-employment screening.  Apparently, the profit from selling this type of credit report was not worth the risk to Equifax.  There has been a lot of reporting about the trap that potential employees find themselves that starts with them becoming unemployed, leading to them getting behind on their bills, which hurt their credit scores and then, when they finally get an interview, they don't get the job because their potential employer doesn't like the looks of their credit report, which leads to further unemployment and further damage to the credit report. 

Here's John Ulzheimer's reporting on the subject -

Atlanta-based Equifax is no longer selling credit reports to employers for the purposes of pre-employment screening, according to Tim Klein, a company spokesperson who revealed the information in an interview with the Dallas Morning News. The credit reports sold by Equifax into the employment market, formerly known as "Persona", were used to determine employment eligibility. And while this is still perfectly legal under the Fair Credit Reporting Act, the company seems to have proactively decided that selling reports to employers wasn’t worth the trouble.


Long a public relations loser, the use of credit reports by employers has become even more controversial given the current economy and the added difficulty that poor credit causes a job seeker who is already having trouble finding a job. Employers who are filling positions where access to money and sensitive information are commonplace have traditionally reviewed credit reports as part of their pre-employment screening processes. The practice is important, as the number of internal data breaches has increased over the past decade. Weeding out an applicant with troubled credit is a responsible act by any such employer.

The trouble with the practice is that it can be unfair to some consumers who have found themselves thrown into credit difficulty through no fault of their own. Layoffs, divorce, uncovered medical expenses, business failures, and death in the earning family can all cause a consumer’s credit reports to become littered with negative information despite no lack of credit management responsibility. And some argue that using credit reports as a screening tool can be unfair to minorities, a claim that lacks any scientific support at this time.

Credit scores, a risk prediction tool used by most lenders and insurance companies, are not provided to employers by either of the two companies that are still selling credit reports for employment purposes, TransUnion and Experian. Credit scores are not designed to predict employee quality or employee performance, so their use for employment screening would be inappropriate. The topic of credit scores and employment continues to be confusing given the amount of incorrect coverage of the issue.

So the next time you’re looking for a job and the job entails you standing in front of a cash drawer, you can still assume that your credit report will be pulled as part of the screening process. It just won’t come from Equifax. And it still won’t have your credit score.

 One down, two to go.

Credit Reports, not Credit Scores, Affect Employment Chances

As I have reported previously, potential employers have a permissible purpose to obtain your credit report with consumer consent.  According to Pamela Yip with the Dallas Morning News, the credit bureaus do not get your credit score with a credit report obtained for employment purposes.  Pamela reports the following as the positions of each of the credit bureaus:

• "The key point to consider here is that credit scores are not predictive of employment performance," said Steven R. Katz, director of consumer brand at TransUnion. "They are designed to predict the likelihood of such things as an individual defaulting on a loan or filing for bankruptcy."

• "We don't provide credit scores with an employment report because they're not extending you a loan," said Michele Boddavice, president of product management and development at Experian Credit Services. "There's no relevancy there to your credit score and an employment decision."

• Equifax doesn't "provide credit scores or files [credit reports] for pre-employment screenings," said spokesman Tim Klein.

FTC nails two companies for FCRA violations

The FTC has settled complaints filed against Quality Terminal Services, LLC and Rail Terminal Services, LLC for allegedly violating the Fair Credit Reporting Act by secretly using consumer reports as the basis for firing employees and rejecting job applicants but not informing the spurned workers and applicants of their rights granted by the FCRA. Here's more about this from 7thSpace.com.

"Two companies that fired workers and rejected job applicants based on background checks without informing them of their rights under the Fair Credit Reporting Act (FCRA) have agreed to settle Federal Trade Commission charges that they violated federal law. The settlements require the defendants to pay $77,000 in civil penalties and bar future FCRA violations.

Employers often conduct background checks and seek employees’ and job applicants’ credit records, criminal histories, and other background information from a consumer reporting agency (CRA) such as a credit bureau or background screening company. The FCRA requires that before taking adverse employment actions based on these consumer reports – for example, firing employees or denying job applications – employers must provide the employees or applicants with a copy of the report, identify the CRA that provided it, notify them that the CRA did not make the adverse action decision, and inform them that they have the right to obtain a free copy of the report from the CRA and dispute its accuracy. According to the FTC’s two complaints, both defendants contracted with a CRA to conduct background checks including criminal record reviews for employees and job applicants, and made hiring and firing decisions based on those background checks. The companies allegedly failed to provide the employees and applicants with pre-adverse action notices and adverse action notices as required by the FCRA.

The settlements require Quality Terminal Services, LLC and Rail Terminal Services, LLC to pay $53,000 and $24,000 in civil penalties, respectively, and to provide the FCRA-required notices in the future. The settlements also contain record-keeping and reporting provisions to allow the FTC to monitor compliance. The Center for Democracy and Technology (CDT) filed a petition with the Commission complaining of adverse action notice violations by the defendants. The FTC acknowledges CDT’s invaluable contribution in bringing these matters to the agency’s attention.

The Commission vote to refer the complaints and stipulated final orders to the Department of Justice for filing was 4-0. The action against Rail Terminal Services was filed in the U.S. District Court for the Western District of Washington; the action against Quality Terminal Services was filed in the U.S. District Court for the District of Colorado."

The whole article is here - http://7thspace.com/headlines/316906/two_companies_pay_civil_penalties_to_settle_ftc_charges_failed_to_give_required_notices_to_fired_workers_and_rejected_job_applicants.html

Does a bad credit report necessarily equate to a bad employee?

Nancy Schuman wrote a great article today about the impact of the recession on good employees' credit scores and how financial hardship does not make a good employee bad.

"This economy has no doubt impacted the personal finances of many individuals in terms of mortgage payments, car payments, credit card balances, childcare and medical costs. Combine these struggles with a job layoff or pay cut and it’s hard to keep your head above water. Here you are conducting a job search so that you can improve your financial situation and suddenly you learn that your personal finances may prevent you from getting the job offer! It’s a vicious cycle currently faced by job hunters nationwide, and it can move a top candidate to the bottom of the pile.

Today, more and more employers are running credit checks on candidates and it’s no longer just for positions with access to money such as cashiers, tellers and financial professionals. Industry reports indicate that more than 40 percent of employers are running pre-hire credit reports as part of their due diligence process. Some companies believe they can deduce how a person will handle their job responsibilities based on how they handle their personal finances. Others use the information to gauge how long a person might stay in a position if their debt load is higher than a position pays. It is also used to verify employment history and a social security number.

There is no clear connection between a credit history and job performance, and many job seekers consider it to be an unfair way of screening candidates, however, no Federal discrimination law specifically prohibits employment discrimination on the basis of a bad credit report. The Fair Credit Reporting Act (FCRA) and state credit laws help to regulate how an employer can obtain and use their findings. An employer must gain your consent in writing to do a credit check and the report they receive is different than one viewed by a credit agency or an individual. Full account numbers are not revealed and they won’t see a credit score, but they will be able to see late payments, collections and bankruptcies. If you are actually denied employment because of your credit report, the company must notify you so that you may view the report on which the decision was based.

The bottom line is that if you are currently interviewing or are about to do so, view your own credit report so that you know what it says so that you can run interference on something that may appear damaging."

Nancy then gives contact information for each of the credit bureaus so her readers can get their free annual credit report. However, I have not reprinted this part of Nancy's article since that's not the way to go about getting your free credit reports. The best (and only) way to get your annual free credit reports is to visit www.annualcreditreport.com and either request them online or via their pdf form that you can print out and mail.

The article ends with the following:

"According to www.ConsumerReports.org, consumers find 13 million inaccuracies on their credit reports each year, so it is worth your time to investigate, review and dispute if necessary. Since an employer must alert you if they plan to run a credit check, you can certainly ask how the information will be used to judge your suitability for employment. If you suspect that something on your record could hurt your chance of an offer, you might want to deflect this in advance by letting the interviewer know that there may be some late payments, etc., but that in no way impacts your abilities. You might state that since your recent layoff, current economic challenges have made it necessary for you to stretch your dollars and prioritize needs.

In the meantime, a House bill introduced last month would prohibit employers from using credit report details for their hiring decisions. The Equal Employment for All Act, if passed, will keep credit worthiness (with some exceptions for financial firms and government agencies) out of the employment process so that getting credit at work will make it more about performance than payments."

I have posted about the proposed Equal Employment for All Act. My prior post can be found here - http://fcralawyer.blogspot.com/search/label/Equal%20Employment%20for%20All%20Act.

Nancy Schuman's full article can be found here - http://www.longislandpress.com/2009/08/06/does-bad-credit-a-bad-candidate/.

How your credit report can keep you from getting a job

Liz Wolgemuth of U.S. News and World Report wrote an excellent article about the tragic circle one can get caught in when looking for a job with a less than stellar credit report. Here's a quote:

"This sounds like a cycle of pure misery: First, you get laid off. Then, you're one of the 4.4 million Americans who in June saw their job searches stretch out six months or more. The bills keep rolling in—car payment, house payment, medical bills—and your credit card balance is ballooning. You interview for a job and you're one of the top candidates, but a late-stage credit check has the employer going with another hire. The bottom line: You need a job to improve your financial situation, but your finances are now hurting your ability to get a job.

A House bill introduced earlier this month aims to prevent such a situation. The Equal Employment for All Act would prohibit employers from using the details of a consumer credit report in making hiring decisions, with exceptions for financial firms and government agencies, as well as jobs requiring certain security clearances. The legislation follows efforts by some states to sharply limit employers' ability to consider a person's creditworthiness in hiring.

While credit checks historically were used to screen applicants for financial and government jobs, the practice has spread. More than 40 percent of employers run credit checks on job candidates, according to some research. Rep. Steve Cohen, who introduced the bill, points to a report that a third of workers making less than $45,000 a year have poor credit scores linked to bankruptcies, loan delinquencies, divorce, medical problems, or unemployment. The bill would give 'some of our most vulnerable, 'credit challenged' citizens—students, recent college graduates, low-income families, senior citizens, and minorities—the opportunity to begin rebuilding their credit history by obtaining a job,' Cohen says."

The rest of the article can be found here -