Relief for Unemployed Job Seekers: Credit Checks Banned in Illinois

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The catch-22 of being unemployed and being unable to pay the bills, and thus being unable to get a job because of bad credit, is ending, at least in Illinois.

Illinois Gov. Pat Quinn signed a new law Tuesday -- the Employee Credit Privacy Act -- that prohibits employers from using a person's credit history when it comes to getting a job. The law goes into effect Jan. 1, 2011. The Society for Human Resources Management recently found that 60 percent of employers run a credit check on at least some applicants, according to the governor's website. That's up from the 42 percent in 2006 and 25 percent in 1998.

There are exceptions to the new law, including people who work in banking and insurance because they have access to confidential financial information. And employers can still check applicants' backgrounds, but not their credit histories.

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The theory behind employment credit checks is that they'll show an employer a pattern of being responsible or not in paying your bills, and that the traits that can lead to bad credit could hurt job performance. Or, having monthly debts above your salary could be a problem for employers. Of course, not having a job and money to pay bills can lead to bad credit just as much as not paying your bills on time, even if you have money.

Some payday lenders even make it easy for workers to get payday loans without having a credit check. Try getting a loan while unemployed and see how far you get.

The new law in Illinois is welcome relief for unemployed job seekers there, but nationwide the unemployed have rights under the federal Fair Credit Reporting Act when getting a credit check done while applying for a job. Applicants must give their written permission for the credit report to be made, and it can't be used to deny them a job until the applicant has had a chance to review the report.

Information from a credit report should be directly job-related, which is why it's often used in jobs where workers handle cash. A Chicago Tribune editorial against Quinn's approval of the bill says that credit histories are a useful tool in verifying work histories, and that the exceptions include hiring someone in a management position. The new law gives Illinois employers another reason not to hire in the state, the newspaper concludes.

Quinn, however, disagrees and thinks credit checks aren't necessary in determining if someone is qualified for a job. "A job seeker's ability to earn a decent living should not depend on how well they are weathering the greatest economic recession since the 1930s," Quinn said in a statement. "This law will stop employers from denying a job or promotion based on information that is not an indicator of a person's character or ability to do a job well."

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