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Should Credit Checks By Employers Be Banned? Survey Says Yes.

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In September 2010, then-California Governor Arnold Schwarzenegger vetoed a bill that would have significantly restricted the use of credit checks by employers in California. If the same bill were put before the American people, though, more than half of them would have likely signed it into law. According to a recent Credit.com survey, the majority of Americans approve of the idea of banning the use of credit reports for employment screening.

In a January 2011 Credit.com survey conducted by GfK Roper, 1000 consumers were asked:

Employers have the right, with your permission, to check your credit report as part of background screening for employment. A number of lawmakers are interested in banning this practice – do you…

- Agree with a proposed ban on this practice?
- Or, are you OK with allowing this practice to continue?

More than half (53.5%) said they agreed with a proposed ban, with slightly more women than men in agreement (55% as opposed to 51.7%) — 39.3% stated they were OK with employers using credit reports to screen job applicants, and 8.2% said they didn’t know.

According to a Society for Human Resource Management (SHRM) survey of its members, 60% perform some type of credit report screening on job candidates, but only 13% check the credit of all job candidates.

[Related: Employer Credit Reports: What You Should Know]

Credit checks by employers have become a hot button issue. According to the National Conference of State Legislatures, 33 bills in 18 states and the District of Columbia were introduced in the 2010 legislative session to restrict the use of credit reports by employers.  While most were defeated, two became law, and could serve as a model for other federal legislation:

Illinois: Beginning January 1, 2011, the Illinois Employee Credit Privacy Act prevents employers in that state from reviewing job applicants’ or employees’ credit reports, except in specific circumstances such as jobs that provide access to personal, financial or confidential information, trade secrets, or state or national security information.

Oregon: A law passed in 2010 prohibits employment discrimination by employers on the basis of information contained in a worker’s credit history, with exceptions, including permission to use that information when it is “substantially job-related.”

Are you worried that your credit could cost you a job you need to pay your bills? Here are some tips:

  • Review your reports. If you are job hunting, make sure you at least know what’s in your credit reports. Visit AnnualCreditReport.com to get copies of your credit reports from all three major credit reporting agencies. If you are unemployed, you are entitled to an additional free copy of your credit report. Follow these instructions.  Then use Credit.com’s free Credit Report Card to help you understand what that information means. (Keep in mind, employers do not get or use credit scores.)
  • Be proactive. Under federal law, employers must get an employee or applicant’s specific written permission before obtaining his or her credit report. If you know there are problems, provide an explanation with your application. Many employers say they would rather a candidate be upfront about problems than hide them.
  • Monitor your credit. Wonder whether an employer is checking your credit? Monitor your credit reports. Anytime your credit information is obtained by a third party, an “inquiry” will appear on your credit report. Just remember that the name of the company inquiring may be different than that of the prospective employer, since many use third-party background screening services.

[Product Spotlight: Get all 3 Credit Reports with Equifax's 3-in-1 Monitoring with Credit Score]

Weigh In! If you believe your credit has kept you from getting a job, share your story in the comments section below. Or maybe you’re an employer and you’ve found credit reports helpful when screening applicants. We’d like to hear from you.

This national RDD Probability Sample telephone poll was conducted for Credit.com by GfK Custom Research North America from January 14-16, 2011. A total of 1,004 interviews were completed, with roughly 531 female adults and 473 male adults. The margin of error is +/- 3 percentage points for the full sample.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • http://www.ESRcheck.com Les Rosen

    The survey may have been much more useful if the question would have clarified that a person�s credit score is NOT used for employment. Most consumers do not realize that when used for employment, there is a special version of the credit report that does NOT have information such as the applicant�s age or credit score. For more information on how and why employers use credit reports, and how applicants can protect themselves, there is an interesting whitepaper on the topic a the web site for the National Association of Professional Background Screeners (NAPBS) at http://www.napbs.com/files/public/Consumer_Education/Credit_Reports_for_Background_Screening.pdf

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  • Sheila Coleman

    I wrote the following letter to these representatives.

    “Representative William McGee
    District 75
    William.Mcgee@ncleg.net
    North Carolina House of Representatives
    300 North Salisbury Street, Room 634
    Raleigh, NC 27603-5925
    919-733-5747

    Senator Linda Garrou
    District 32
    linda.garrou@ncleg.net
    North Carolina Senate
    300 North Salisbury Street, Room 620
    Raleigh, NC 27603-5925
    919-733-5620

    I am writing as directed by Congresswoman, Virginia Foxx to express my concern of employers determining employment by use of credit services and inquiries made to personal credit reports.

    In the past few years, Hawaii, Illinois, Washington and Oregon put limits on pre-employment credit checks; most recently, Maryland adopted a law in April, and Connecticut did in July. These state laws contain exceptions — they may not apply to certain kinds of companies, like banks, or when an employer can show that the credit check is legitimately job-related. Read more: http://www.time.com/time/nation/article/0,8599,2096608,00.html#ixzz233FLJKF4

    Also in reviewing the list provided by http://www.ncsl.org/issues-research/banking/use-of-credit-information-in-employment-2010-legis.aspx

    I do NOT see where North Carolina has presented any documents in which to prohibit the use of credit screening for job applicants.

    Last evening I saw a report on the Greensboro WFMY news channel that listed 2,600 CHILDREN without homes. There were almost a thousand in Winston Salem. These are just children.

    Our unemployment is devastating. I, for one have a story to share and I hope you will take the time to read it at least.

    I am a 56 year old female. I raised one daughter as a single parent without the help of her father because in the 80′s if you had a job, you did not qualify for assistance. Attorney fees were among the lowest importance due to the fact we did not qualify for food stamps, we had to eat, or housing assistance, we needed somewhere to live. I worked 2 jobs most of the time.

    I taught myself computer programs where I was able to get a receptionist job. The company allowed me to train myself after work at night where I developed my skills in computer programs.

    I went on to work as an administrative assistant and took on line classes through work to educate myself further.

    In 2009 the company I worked for failed, and was sold and moved and I had no job. I decided to join the unemployed in education and obtained an associates degree in healthcare management technology through a community college with the help of the WIA program. I achieved this program, although difficult, as I had not been to college and had not been in school since 1974. However, while doing this, I was unable to maintain my credit; I had 2 judgments put against me while I was already seeking the help of a credit management firm. Now I have sold my home and paid off the 2 judgments and completed the credit assistance program to help me pay off the debt I had, plus I paid off my car.

    I have further enrolled in another community college to advance the business administration studies to obtain an associates degree in business. With the studies already completed I could enhance my business courses within one year to obtain another degree.

    During all of this, I have applied continuously for a job and have been unable to obtain work other than a part time sales position that I have held since 2010.

    I hardly make enough money to support myself and I cannot afford the little health insurance they provide, however I do maintain dental insurance.

    I have numerous letters of recommendations from previous employers; you can view some of them at http://www.linkedin.com/pub/sheila-coleman/48/898/a15

    Yesterday, I received the second letter of this type.

    “This notice is to advise you that Piedmont Advantage Credit Union is taking the following action with
    respect to your potential or current employment:
    Due to the credit history reported and consistent with Piedmont Advantage Credit Union standards, we
    have chosen not to offer you employment.
    This action is based in whole or in part upon information contained in a consumer report with you
    authorized PACU to obtain in connection with its background investigation of you. This information has
    been considered and is being used by Piedmont Advantage Credit Union in accordance with applicable
    law, including applicable federal and state equal employment opportunity laws and regulations.
    The name, address, and telephone number of the consumer reporting agency that furnished your consumer
    report to Piedmont Advantage Credit Union is:
    Equifax Information Services LLC
    PO Box 740241
    Atlanta, GA 30374-0241
    800-685-1111
    You should note that this consumer reporting agency did not make the decision to take the above-noted
    adverse employment action against you. For this reason, the consumer reporting agency will be unable to
    provide you with the specific reasons why Piedmont Advantage Credit Union decided to pursue this
    adverse employment action.
    Pursuant to section 612 of the Fair Credit Reporting Act, you have the right to obtain a free copy of your
    consumer report from the consumer reporting agency, provided that you make your request within 60
    days after receipt of this Notice of Adverse Employment Action. Pursuant to section 611 of the Fair
    Credit Reporting Act, you have the right to dispute the accuracy or completeness of any information
    contained in your consumer report with the consumer reporting agency.
    Piedmont Advantage Credit Union is providing you with this Notice of Adverse Employment Action in
    accordance with the requirements of the Fair Credit Reporting Act.
    Sincerely,
    I
    Susan Jones
    Human Resources Coordinator
    http://www.pacu.comI381ON.LibertyStreet.Winston-Salem.NC 27105 I 336-776-1700 I 800-433-7228”

    I find it humiliating. At first glance, you might think I applied for a job at this company, which I did not. Secondly they are notifying someone that I may have already been offered a job by their decision to now not offer me a job based on their credit report findings.

    After all I have struggled, lost my job, obtain an education to better my knowledge, I am sent a letter in such a format from a perfect stranger who has never looked at my job application, spoken to any of my references, nor reviewed my experiences. However she has made her decision to inform someone of my inability to perform the job that she does not even identify that I applied for based on a credit report.

    I ask, in this economical downfall this country has found itself in, why am I not finding you as a representative of this state making an effort to prohibit such unjust hardships on those that have tried to better themselves and only want to return to work in order to be able to give back to the economy in addition to provide themselves with health care.

    I look forward to your response in this matter and thank you for the time you have taken in which to review my request.

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