How bad credit can cost you a job

By Liz Pulliam Weston

Job hunters, how's your credit?

Many Americans these days are discovering the Catch-22 of unemployment. And that is: You might fall behind on your bills because you've lost your job, and you might not be able to land a new job because you've fallen behind on your bills.

A fair chunk of employers want to examine your credit history before offering you a position or a promotion. Blotches there -- repossessions, collections, high credit card balances -- could cost you the job you want. For example, applicants for Transportation Security Administration airport screener jobs are rejected if they have more than $5,000 in overdue debt.

Recent statistics are scarce, but when the Society for Human Resource Management polled its members in 2006, 43% of their companies ran credit checks on some or all potential hires. That was up from 25% in 1998.

Plenty of people don't think that's fair, including Rep. Steve Cohen, D-Tenn., and 26 of his congressional colleagues, who on July 9 introduced H.R. 3149, which would prohibit the use of credit information in most employment decisions. Two states, Hawaii and Washington, already do so.

Bad credit still beats a criminal past

"There's so much financial turmoil right now. People have lost jobs, homes, income," said consumer advocate Ruth Susswein, the deputy director for national priorities for Consumer Action. "Some people who have had good credit may no longer, and when they most need a job, it seems unfair to put that at risk for something that may have nothing to do with the job they're after."

It's too early to predict whether the bill has a shot at becoming law, but even if it did, there would be some exceptions, including:

• Jobs involving national security or Federal Deposit Insurance Corp. clearance.

• Employment with a state or local agency.

• Supervisory, managerial, professional or executive positions at financial institutions.

Some employment experts say concern about credit checks is overblown. For one thing, they say, companies typically are far more interested in other kinds of background checks, including identity verification and criminal histories. (For more information on background screening, see "Secrets a background check won't uncover.")

Job applicants are much more likely to lose jobs because they have a recent criminal history or they lied on an application about their identity, experience or education, said William Greenblatt, the CEO of Sterling Infosystems, a New York City background-checking firm.

Employers are more likely to use credit reports as a way to verify employment history and Social Security numbers, Greenblatt said. Lenders often verify employment when you apply for a loan or credit card, so a credit report is seen as a good way to double-check the employers listed on a job seeker's application.

Will you work with money?

But many companies do use credit histories as a way to weed through job candidates. In the private sector, the people most likely to have their credit reviewed are those who will deal with cash or valuables, or who are financial executives, said Greenblatt, a labor attorney with more than 30 years' experience in employee testing and screening.

"Bank tellers, CFOs (chief financial officers), controllers, people who work for brokerage institutions, financial institutions," he said. "Jewelry manufacturers do credit checks. . . . When you're dealing with diamonds, they're easily concealed (and stolen)."

The rationale is that people with big debts or other credit problems may be more likely to steal or commit fraud. Even if a job doesn't involve money, some employers are convinced that people who manage their credit well are better workers than those who don't.

"There's a perceived correlation between a high debt load and the possibility of embezzlement, theft or malfeasance," said employment attorney Manesh K. Rath, a partner at Keller and Heckman in Washington, D.C., who advises companies about their hiring practices. "This is a widely held belief in the employer community."

But what's also driving the push to check credit is fear of lawsuits, Rath said, especially in businesses where employees have access to customers' money or possessions, including the banking, property management, hotel and home health care industries.

If a visiting health care worker steals something from a client's home, for example, that client isn't likely to sue the offender in civil court. The client might instead sue the employer, which is perceived as having deeper pockets and responsibility for hiring the thief.

"The employer will have a tough time defending itself," Rath said, "if it didn't take the simple measure of doing a background check."

Continued: Clean up or clear out

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