Credit checks don't tell potential employers enough to allow them

credit checksThe state of Oregon is considering a bill I think is a fabulous idea. SB 1045 is titled "Limits use of credit history for employment purposes to certain circumstances," and it does just that: prevents employers from requesting credit checks to use as a screening tool for potential employees, unless the credit history provides a substantial relation to the employee's job (for instance, a bank teller or mortgage broker position).

As someone who's seen this issue from many angles: as an employer who checked credit; as an individual with bad credit looking for a job; and as an employer burned by unethical employees, I believe credit histories, instead of providing an employer with valuable tools, are loaded with pitfalls on both sides of the hiring desks.

Credit checks are frequently used to eliminate employees with bad credit histories from jobs. It's a shame, too, as a study released in 2003 by professors from Eastern Kentucky University showed no correlation whatsoever between credit scores and job performance.

Frequent inaccuracies in credit reports only make the picture muddier -- could you be granting a job, or excluding a candidate, based on information for that other Jeff Rogers? It's increasingly likely.

And then there's the recession. Unemployment, like almost nothing else, is a surefire credit destroyer. Is it the least bit sensible to eliminate a job candidate from the running for a job due to how extraordinarily available he is? It hardly seems human.

Stories abound; listen to any call-in radio show, read any blog post on the subject, and you'll hear them. Foreclosures begin when you've got to choose food and electricity over mortgage payments. Credit cards get maxed paying for breakfast, lunch, dinner and toilet paper; medical bills pile up when you've got the double whammy of unemployed and uninsured.

Sure, it doesn't look (umm) "responsible." But is it going to help the poor soul any to snatch away the job that could have restored his responsibility right quick? Don't answer that.

I worked, in my late 20s, for a company that provided direct marketing programs for car dealerships. One of our main products was a direct mail piece targeted toward people whose bankruptcy discharge date was a few weeks away. Fresh off a credit-walloping event and in need of transportation and a chance to rebuild credit, these consumers were a fantastic and eager market for anyone who'd promise not to care. (Helpful to car dealerships was the hefty interest rate they could charge.)

With great irony I'd hand out the forms to run credit checks on prospective employees. How could I judge these people? The worst of them would be our best customers' best customers. I never used the information, choosing instead to judge them based on how they answered my questions, and the questions they asked me.

Later, our company would suffer a betrayal from one of the management team. He took everything: the client database, sales training documents, a number of the company's employees.

I'd seen this man play fast-and-loose with the truth but I knew his credit score was great. He'd laughed about hiding most of his income from his ex-wife: he owned a few homes, a luxury car. At that point in time, he would have been a fantastic candidate for employment. Reliable credit history. Responsible homeowner. Yes!

And then there's Bernie Madoff, the poster child for critics of credit reports. How do you thinkhis credit report looked [scroll down on that link -- you'll see a charge to on Madoff's credit card statement] in the middle of the last decade? If the bureaus could bestow a "platinum" rating, it would surely have gone to him. Look how that worked out.

Let's face it: the stuff that would flag a potential employee as someone who might run a pyramid scheme, steal your customer data, or embezzle from your company's bank account doesn't show up on a credit check.

Bookies don't report bad debts to Equifax; the poor ethical choices strewn in the path of a future criminal don't typically consist of choosing to buy food instead of making car payments. Why muddy the waters and trample all over what little privacy and self-respect potential employees might have? The Oregon bill is a great idea, and other states would do right to follow suit.
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