Credit Reports Playing Bigger Role in Tough Job Market

Many employers are pulling credit reports to get a fuller picture of a prospective hire’s character, but is this fair in a tough economy – or at any time?
The role of credit reports in hiring practices took to the national stage on Sunday when CBS News profiled one man’s struggle to clear a mistake on his credit file, one that cost him a job as a TSA baggage screener.
Emmett Pinkston is a military veteran, recently having worked in intelligence and with stints in Iraq. That’s more than enough, he thought, to land the screener job.
But Pinskton didn’t get the job because of an erroneous charge of $8,000 that turned up during a credit check. CBS News reported that Pinkston is one of at least 22 million Americans with an error on their report, citing credit industry data.
With unemployment climbing back up a notch to 8.2 percent, as reported last Friday, more Americans are struggling to find a job, which may taint their credit files if they have trouble paying the bills.
Several states have or are considering legislation to curb the practice of pulling a prospective employee’s credit report as a consideration for hiring. One recent survey found that 60 percent of employers use the reports to help evaluate at least some job applicants.
But consumer advocates say there is no proven connection between a person’s credit history and the individual’s ability to perform a job. And such hiring practices can amount to discrimination and invasion of privacy.
A credit industry spokesperson told CBS News that considering a person’s financial well-being is fair game to help prevent potential crimes.
“A person who is living who is living beyond their means, think about FBI agents for example who sold secrets; a person who has financial stress can sometimes be more prone to external risks,” Stuart Pratt, who represents the credit industry, told CBS News.
Amy Traub, a senior analyst at Demos, a public policy think tank, testified in February before the Colorado legislature on the state’s Employment Opportunity Act, which prohibits the use of consumer credit information for employment purposes if the information is unrelated to the job.
Employment credit checks have become commonplace because “employers are looking for a way to predict if a potential employee will be honest, if they will handle money responsibly, if they are likely to steal or commit fraud,” Traub told the Colorado Senate Judiciary Committee. “However, reviewing the social science research on this issue, I have found no credible evidence that credit reports reveal this information.”
A spokesperson for one of the major credit reporting agencies has admitted that he has seen no evidence to support the use of credit checks for employment purposes, Traub told lawmakers.
The Consumer Financial Protection Bureau is poised to provide the first U.S. agency oversight over the credit reporting industry, including the three primary credit bureaus –  Experian, Equifax and TransUnion ­– and other lesser-known agencies.
It is uncertain if the bureau will seek to place limits on the distribution of consumer credit files to employers as a part of a job screening process.
Lenders typically review credit reports when evaluating applications for credit cards, home mortgage loans, automobile loans, and other types of credit. Specialty consumer reporting agencies collect and provide information used to make eligibility decisions for a variety of products, such as checking accounts.

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