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Job-Seekers with Bad Credit Stuck in a Vicious Cycle

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Lauryn Beer worries about her basset hound, Halsbury, and whether she can to afford to have her teeth cleaned. She worries whether she can afford to get her hair cut or her favorite pair of boots re-heeled.

This is not the life Beer planned for herself when she was pursuing a degree in English at Oxford and a law degree at Georgetown University. But a job loss several years ago made it impossible for her to make her student loan payments. That destroyed her credit, which has made it significantly more difficult for her to land a new job.

She was turned down for a government legal job representing victims of Hurricane Katrina because the contractor checked all applicants’ credit reports. She even missed out on a freelance legal position because of her credit report – the recruiter said that people with poor credit need not apply. Now she asks beforehand whether an employer checks credit (most say they do) because “I don’t want to waste my time,” Beer says. Most of the jobs involved providing legal assistance, and none required her to work with money or finances.

It’s a vicious cycle. Having good credit would help her get a job. But because she doesn’t have a job, she’s stuck with bad credit.

“It’s quite ridiculous,” says Beer, who has started a blog covering problems in the credit reporting industry. “My credit has absolutely nothing to do with how well I can perform my job. Bernie Madoff had fabulous credit.”

More Employers Checking Credit

A growing number of American employers use credit checks to determine whom to hire. Sixty percent of employers use credit checks in the hiring process, up from 35% in 2001 and just 19% in 1996, according to a report by the Society for Human Resource Management.

Employers and their lobbying groups argue that the practice is actually far more limited, affecting mostly executive positions and jobs that involve handling finances. Consumer advocates have their doubts.

“That’s just not true,” says Ed Mierzwinski, director of the consumer program at the U.S. Public Interest Research Group (PIRG). “These companies are too lazy to interview job applicants, so they’re using credit reports to weed people out for all kinds of jobs.”

Industry representatives agree that at a time when most companies fear getting sued for sharing any information about former employees, especially negative performance reviews, employers believe that a credit check provides a rare independent perspective on the qualifications of potential workers.

“While credit histories are but one piece of the puzzle used by HR professionals in evaluating job candidates, the information can be useful in determining whether a candidate has the skills and decision-making qualities for a particular job,” Christine V. Walters, a human resources expert, testified before the Equal Employment Opportunity Commission in October. “It can also help a potential employer assess whether the individual is qualified to handle money.”

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