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States to ban job credit checks

By Janna Herron · Bankrate.com
Tuesday, June 26, 2012
Posted: 4 pm ET

Many employers soon may not be able to take a gander at your credit report.

Fifteen states and the District of Columbia have measures up to vote this year that restrict how employers can use your credit report in an employment decision such as hiring, firing, promoting, compensating or disciplining, while Vermont's measure on credit reports goes into effect at the beginning of July.

(Similar bills in Florida died in committee and, in Wisconsin, they didn't pass the Senate. Nebraska's measure has been indefinitely postponed.)

The states will follow California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, which have enacted similar legislation. There's even a federal effort by U.S. Rep. Steve Cohen, a D-Tenn., to amend the Fair Credit Reporting Act to keep businesses from using credit checks against current and prospective employees to make adverse decisions.

Now, it may surprise you that employers care at all what's in your credit report. But they do. About 13 percent of companies check credit reports of all job candidates and nearly half do on some, according to a 2010 survey from the Society for Human Resource Management.

Employers look for patterns of bad financial behavior. Employers will ignore the occasionally missed credit card bill or late car payment. Instead, they look for red flags such as ballooning debt, defaulted accounts or judgments against you. The latter can actually affect employers if creditors want to garnish your wages.

What employers can't see is your credit score, which is a common misconception. And many employers give you the chance to explain your credit history if any explanation is needed.

Your credit isn't history once you land the job, either. Some employers will check your credit annually or before a promotion. If your employer wants you to handle confidential material, they may pull your credit report before assigning the responsibility.

Consumer advocates say the practice is unfairly stacked against job seekers who lost their jobs during the Great Recession and suffered some financial setbacks, such as foreclosure or delinquent debts, because of it. One can only hope that a prospective employer has some perspective.

Do you think employers should be able to look at credit reports?

Follow me on Twitter: @JannaHerron

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1 Comment
geo
August 12, 2012 at 1:52 pm

no more credit check.stop this unfair practice.the rich treats us like ants........