Wednesday, August 19, 2009

Another Hurdle for the Jobless: Credit Inquiries

http://www.nytimes.com/2009/08/07/business/07credit.html?_r=4&pagewanted=1&hp

By JONATHAN D. GLATER
Published: August 6, 2009

Digging out of debt keeps getting harder for the unemployed as more companies use detailed credit checks to screen job prospects.

Out of work since December, Juan Ochoa was delighted when a staffing firm recently responded to his posting on Hotjobs.com with an opening for a data entry clerk. Before he could do much more, though, the firm checked his credit history.

The interest vanished. There were too many collections claims against him, the firm said.

“I never knew that nowadays they were going to start pulling credit checks on you even before you go for an interview,” said Mr. Ochoa, 46, who lost his job in December tracking inventory at a mining company in Santa Fe Springs, Calif. “Why would they need to pull a credit report? They’d need something like that if you were applying at a bank.”

Once reserved for government jobs or payroll positions that could involve significant sums of money, credit checks are now fast, cheap and used for all manner of work. Employers, often winnowing a big pool of job applicants in days of nearly 10 percent unemployment, view the credit check as a valuable tool for assessing someone’s judgment.

But job counselors worry that the practice of shunning those with poor credit may be unfair and trap the unemployed — who may be battling foreclosure, living off credit cards and confronting personal bankruptcy — in a financial death spiral: the worse their debts, the harder it is to get a job to pay them off.

“How do you get out from under it?” asked Matthew W. Finkin, a law professor at the University of Illinois, who fears that the unemployed and debt-ridden could form a luckless class. “You can’t re-establish your credit if you can’t get a job, and you can’t get a job if you’ve got bad credit.”

Others say that the credit check can be used to provide cover for discriminatory practices. Responding to complaints from constituents, lawmakers in a few states have recently proposed legislation that would restrict employers’ use of credit checks. While some measures languish, Hawaii has just imposed new restraints.

As HR people have admitted, you can always find a reason not to hire someone.


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More than 40 percent of employers use credit checks at least sometimes, according to a 2004 survey by the Society for Human Resource Management, up from 25 percent in 1998. The share has almost certainly risen today, say career counselors.

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