California became the seventh state in the union to ban credit checks on job seekers. For job applicants with bad credit scores, the credit checks have become the bar they cannot jump over in their pursuit of a new position. Many employers have stepped up credit checks on prospective hires in recent years. Formerly, credit checks were usually reserved for job applicants in positions of trust such as financial services or perhaps for company executives. But in recent years, employers in many other industries have begun screening job seekers using their credit history.
According to a recent report in the Sun Sentinel, two of every three employers admitted that they would be influenced in their hiring decision by a creditor lawsuit or outstanding judgment against an applicant. Other red flags in a job seeker’s credit history, from order of most to least likely to influence a job offer, include an account sent to collections, a bankruptcy, high debt-to-income ratio and a home foreclosure. Back taxes, large school loans or medical debt occasionally affected a hiring decision.
SmartMoney.com reports that employers may feel somewhat justified in screening prospective employees with issues such as credit card debt in their past. According to a 2008 study, employees who admitted to credit issues also were slightly more likely to exhibit similar behavior on the job such as theft, accepting bribes or other breaches of financial trust.
But consumer advocates argue that the credit check litmus test has lost its reliability. Since the recession began in 2008, millions of job seekers have suffered financial setbacks that had nothing to do with their financial actions, including job loss or medical catastrophes leading to missed bill payments, home foreclosure and bankruptcy.
Several employment-related bills were recently introduced in the Florida Legislature in 2012. Several competing proposals have been introduced in both houses that — similar to California’s new law and those of other states — would ban employers from considering credit history while making a hiring decision. On a related note, bills have also been introduced to ban employers from considering a prospective hire’s unemployed status in the hiring decision.
Given the fundamental shifts in the national economy and Florida’s economic landscape in particular, these bills seem to be grounded in fundamental fairness and an understanding of exactly what Florida job applicants have been through during the recession. In our next post, we will talk about what Florida job seekers with credit blemishes can do to aid their job searches.
SmartMoney.com, “Hire Hopes for Job Seekers With Dodgy Credit?,” Annamaria Andriotis, Feb. 3, 2012