Survey: One in 10 Americans denied job due to information in credit report

credit-card-finance2A recent survey found that 25 percent of unemployed Americans have been subjected to a credit check during the job application process, and 10 percent of Americans have been denied jobs because of information contained in the report.

“Employer credit checks are common and they’re keeping people from getting jobs,” Amy Traub, the report author and senior analyst at Demos, which conducted the study, said, according to Daily Finance.

Many people assume that credit checks are only conducted for high-level jobs, such as those in the banking industry, but the study found that credit checks are even used for low-paying, entry-level jobs in the food industry.

Additionally, the study found that bad credit often results from a job loss and the loss of health insurance, leading some consumers to fall behind on payments for large medical expenses. Medical debt also contributes to poor credit ratings among consumers.

“These factors reflect the poor economy and personal misfortune and have little relationship with how well a job applicant would perform at work,” the report said, Daily Finance reports.

Minorities are also more likely to be affected by employer credit checks, because African-American and Latino households, on average, have worse credit scores than Caucasian households, which Demos said can be partly attributed to higher unemployment rates in those communities.

Unemployment among Hispanics reached 10 percent, while the unemployment rate in African-American communities reached 14 percent at the end of last year, compared to six percent for white Americans.

Traub said that while employers are able to see credit report information like bankruptcies, payment history and debts, they are unable to access a consumer’s credit score, which leaves an applicant’s creditworthiness open for interpretation, according to Daily Finance.

A survey conducted last year by the Society for Human Resources Management found that most employers use credit checks to prevent legal repercussions, theft and embezzlement, as well as to screen candidates for jobs that require financial responsibility.

Many employers, however, indicated that credit checks are not the most important factor in making hiring decisions. Only 14 percent of employers indicated that credit checks influenced their hiring decision, compared to 87 percent of employers who said that prior work experience is the most critical factor in their decision, Daily Finance reports.

While current laws prohibit employers from running credit checks without an application’s permission, the rules are difficult to enforce because employers can disguise their true reasons for denying an applicant a job.

Rep. Steve Cohen (D-Tenn.) is sponsoring the Equal Employment for All Act, which would prohibit most employers from factoring in credit checks to hiring or firing decisions.

“When employers use credit checks, finding a job can almost be impossible,” Cohen said, according to Daily Finance. “[This is a] growing trend and a dangerous one.”

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