I noticed a news item from 2010 on how Oregon is banning credit checks by employers save for a few exceptions like banks and credit unions, etc., where employees are routinely handling cash. The thinking is that there’s no difference in performance amongst employees with good credit vs. poor credit and it’s an overstep of employers to be peering into the personal credit histories of perspective employees. While most Americans find the practice of being denied a job based on their credit to be deplorable, there must be some merit to the practice or else companies wouldn’t be spending the money to check it during the interview process, right?
Arguments for Denying Jobs to Applicants with Poor Credit
- Credit score is one of the few measurable factors employers can legally obtain to discern between higher and lower risk candidates. A single day of interviews can’t possibly paint a full picture of what a candidate may be hiding, but a numerical credit score generated by a third party can help raise red flags about an employee’s financial problems before they get in the door.
- Let’s face it, employees steal. They steal from their employers all the time. Perhaps it’s just pens and paper or perhaps they’re putting office furniture and electronics on the dock and walking out the door at night with valuable merchandise. Wouldn’t you think this is less likely to occur with someone with strong credit versus a credit risk?
- Many jobs have a financial management aspect to them – Certified Financial Planners, cashiers, bank tellers and such. Perhaps it’s running a departmental budget or perhaps it’s a purchasing role. In any event, if someone can’t demonstrate competence in managing their own personal finances, why would an employer want to subject themselves to the same performance? Generally, people tend to take even better care of their own affairs than how they handle work, so isn’t this a key indicator?
Arguments Against Using Credit Checks for Employment
- This just extends a vicious cycle for people who were laid off, fell on hard times and ended up wrecking their credit to get by. While they may be good candidates and perfectly employable, until they are employed again, they can’t start deriving an income and fix their credit! It’s a chicken or the egg situation, but with a real person on the other end.
- Many would argue that aside from the jobs mentioned above, creditworthiness is as irrelevant to the job as whether or not one is married or divorced, a virgin or promiscuous, or what religion they adhere to. While these factors may result in different behaviors and thought processes, in the grand scheme of things, they shouldn’t really affect performance on the job, right? Screening for those other factors is impossible or illegal, yet we screen for credit-worthiness.
- What do you do if someone’s credit score drops while they’re employed? Fire them? Is it like a failed drug test? Since the notion is absurd to fire a perfectly good worker well into a job due to an occurrence in their personal life, why is it appropriate to not hire them in the first place?
Where Do I Stand? It depends on the job. It may sound like a cop-out, but seriously, some jobs may have a very strong correlation between performance and personal financial credit-score, whereas others are totally irrelevant. As an employer, I’d probably like to retain the capability to check for this, but in many cases, I probably wouldn’t use it as a measure, or even pay for the credit check. Prospective applicants should use a credit score estimator at a minimum to know where they stand before applying.
Both sets of arguments are sure to stir some emotional responses, but I’d love to hear your objective views of the situation, any personal/career examples, and whether you think it should be legal or illegal to screen applicants for creditworthiness in the workplace.