Dive Brief:
- Michelle Singletary, a columnist with the Washington post, weighs in on a New York City law that went into effect on Sept. 3 that forbids employers, except in limited situations, to check job applicant credit histories
- Singletary writes that the law is being heralded nationwide as an example to follow, noting that Federal law allows employment credit checks under the Fair Credit Reporting Act. It requires employers to get an applicant’s or employee’s permission before pulling his or her history.
- However, Singletary points out that a bad credit record can be the result of a host of problems not linked to irresponsible financial behavior -- for example, many people’s credit rating was brought down by periods of unemployment or medical debt. Some were the victims of predatory lending practices.
Dive Insight:
Amy Traub, a senior policy analyst at Demos, a public policy organization, makes the case for abandoning credit as a job-screening tool in a report titled “Discredited: How Employment Credit Checks Keep Qualified Workers Out of a Job.”
“Despite their prevalence, little is known about what credit checks actually reveal to employers, what the consequences are for job applicants, or employment credit checks’ overall impact on our society,” Traub wrote. “Credit reports were not designed as an employment screening tool. Instead, they were developed as a means for lenders to evaluate whether a would-be borrower would be a good credit risk.”
While employers might see credit reports as a necessary hiring tool because they have been used in the past, it also could have a negative impact on finding the best possible talent. It's something to consider.
