May 29, 2011
Millions of Americans who lost their jobs to the recession and fell behind in payments to creditors are being penalized again, this time by companies that use credit records to screen job applicants. Five states have limited the use of credit histories by potential employers and about 20 are considering similar measures that deserve to become law.
Damaged ratings are often the result of irresponsibility. They can also be due to bad luck and hard times, including a layoff, divorce or catastrophic illness, which is a leading cause of bankruptcy in the United States.
Thanks to intensive marketing by the credit reporting industry, about 60 percent of employers now do credit checks on job applicants — up from less than 20 percent in the mid-1990s. But even some in the credit industry acknowledge that a poor rating doesn’t necessarily make someone a bad job prospect. Last year, Eric Rosenberg, director of state government relations for TransUnion, one of the country’s largest reporting companies, told Oregon legislators: “At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”
Oregon has since passed a bill prohibiting the use of credit histories in job screening with several exceptions, including for federally insured banks or where employers can show that the information is substantially related to the job. Hawaii, Illinois and Maryland have similar laws.
Nearly 45 million Americans have damaged credit. Using a credit record as a key factor in hiring could marginalize millions of families and create a new, credit-record underclass.
Millions of Americans who lost their jobs to the recession and fell behind in payments to creditors are being penalized again, this time by companies that use credit records to screen job applicants. Five states have limited the use of credit histories by potential employers and about 20 are considering similar measures that deserve to become law.
Damaged ratings are often the result of irresponsibility. They can also be due to bad luck and hard times, including a layoff, divorce or catastrophic illness, which is a leading cause of bankruptcy in the United States.
Thanks to intensive marketing by the credit reporting industry, about 60 percent of employers now do credit checks on job applicants — up from less than 20 percent in the mid-1990s. But even some in the credit industry acknowledge that a poor rating doesn’t necessarily make someone a bad job prospect. Last year, Eric Rosenberg, director of state government relations for TransUnion, one of the country’s largest reporting companies, told Oregon legislators: “At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”
Oregon has since passed a bill prohibiting the use of credit histories in job screening with several exceptions, including for federally insured banks or where employers can show that the information is substantially related to the job. Hawaii, Illinois and Maryland have similar laws.
Nearly 45 million Americans have damaged credit. Using a credit record as a key factor in hiring could marginalize millions of families and create a new, credit-record underclass.
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