Do You Need Good Credit to Get a Job?

By Eva Maria Norlyk

Credit scores are increasingly becoming a factor in qualifying prospective employees for a job. About four out of ten employers regularly run credit checks on prospective hires, according to research. For many of the 15 million unemployed Americans looking for a job, this easily turns into the proverbial Catch-22: They need a job to pay the bills and pull their credit score up, but they can’t get a job until they pay their bills and pull up their credit score.

Credit scores were originally used by lenders to determine a person’s credit worthiness. However, in recent years employers are increasingly using this information to make hiring decisions. Credit scores are based on several different variables, such as whether or not a person pays bills on time, how much of their available credit they use, length of credit history, and any recent history of applying for additional credit. Most of these variables are likely to be affected adversely for the long-term unemployed, who increasingly struggle to pay their bills. This creates the unfortunate situation that the longer a person is unemployed, the harder it may be for them to qualify for a new job.

A new House bill introduced in July of 2009—The Equal Employment for All Act— seeks to address this issue by preventing employers from performing credit checks on potential job candidates. The bill aims to give equal employment opportunity to debt-burdened individuals most in need of a steady income. The bill would particularly benefit low-income families and other credit-challenged demographics, who have suffered nixed opportunities from current practices.

The bill does not come without criticism. Critics feel that if companies are unable to see how a candidate has handled his or her own finances, companies are at greater risk, particularly when hiring someone to handle company funds. In their support, according to one study, nearly a third of business bankruptcies can be traced to employee theft. Financial firms and government agencies will still be allowed to perform credit checks, however, non-financial, non-federal companies would not be able to do a credit check on prospective employees.

Supporters of the bill counter that personal finances, and thereby a person’s credit report, are affected by numerous factors beyond a person’s control, including medical expenses to lay-offs. Such events are not really reflections of a person’s reliability or their ability to do a job. In addition, they argue, indicators of untrustworthiness are far more likely to be found in criminal, not credit records.

It’s too early to say whether or not the house bill will pass. However, for the millions of unemployed struggling to keep up with their bills, it’s certainly a step in the right direction.

Published: October 28, 2009