Growing Use of Credit Reports in Hiring Decisions

May 12, 2012

Growing Use of Credit Reports in Hiring Decisions

There is a growing trend among employers across the country to use credit reports to screen job applicants. While the practice is largely illegal in Maryland, the phenomenon is disturbing given the considerable difficulties already facing many of today's jobseekers.

More than ever before, according to USA Today, recruiters say employers are using credit reports to screen potential employees. While small business owners may approve of the strategy, folks who are out of work and down on their luck do not view the policy as favorably.

One trade group that represents the interests of small business, the National Federation of Independent Business, believes employers should have every tool at their disposal to make informed hiring decisions and that credit reports provide objective information about the past decisions of potential employees. However, many job applicants and some state legislators examining the issue do not agree.

Critics of the policy say credit reports do not provide information that explains why someone made a late payment, chose not to pay a bill or entered bankruptcy. In many cases, bad credit is the result of unexpected life events such as medical debt or the loss a job. Furthermore, those against the policy argue credit reports are supposed to be used by lenders to determine whether an individual is creditworthy enough to receive a loan -- not by employers questioning whether an applicant is creditworthy enough to be offered a job. As one state lawmaker put it in a USA Today article that examined the issue, "If [credit reports] gave a clue about an employee's job skills, that would be a different discussion."

Federal law addresses the issue in the Federal Fair Credit Reporting Act. The federal law requires employers to obtain the permission from applicants before credit reports are reviewed. However, a potential employee who refuses to provide permission may find his or her application set to the side. Therefore some states have also addressed the use of credit reports for job application purposes. Maryland is one of seven states that prohibit the use of credit scores in hiring decisions; however, there is an exception for jobs that require the handling of significant amounts of money.

Lawmakers want to balance the concerns of business owners with job applicants, but some lawmakers believe that without sufficient protection individuals with poor credit face long-term unemployment. Without a source of income, it is hard to improve a credit score.

If you have debt concerns, contact an experienced bankruptcy attorney today to discuss your legal options.

Article provided by Law Offices of David I. Steinberg
Visit us at http://www.dsteinlaw.com