By Juliette Fairley
Nov. 4, 2010
Joey Price thought he’d found the perfect job candidate to fill the conference planner position at BL Seamon Corp. Fresh out of college, Price’s top candidate nailed the interview and application process.
The Washington-based human resources assistant director was about to make an offer—until he reviewed the applicant’s credit report.
“There were car repossessions, extremely high credit card bills and collections,” says Price who no longer works for BL Seamon. “When we asked her about it, she avoided the subject and was hard to reach. We were able to see that a lot of the information on her résumé didn’t match up with dates in her credit report.”
Price passed on the candidate in favor of an applicant who was less qualified but still competent with a cleaner credit report.
“It’s easy to put on a façade, but a credit report doesn’t lie. It’s a credible source to use to get to know an individual,” says Price who is now a human resources specialist with TW & Co., a security firm.
Employers use credit reports to screen workers because they say they believe it allows them to predict future behavior based on their financial history. A 2010 survey by the Society for Human Resource Management found that 60 percent of employers used credit reports for some or all of their background checks.
Of those who ran credit checks on only some candidates, 91 percent screened those who would have financial responsibilities. The primary reasons for credit background checks: to prevent theft, to reduce legal liability for negligent hiring and to assess the trustworthiness of applicants.
However, the Catch-22 about checking credit: An applicant who has been unemployed for months may have no choice but to rack up debt and fall behind in paying bills.
“If someone is out of work, they are likely to have a lower credit rating. That doesn’t necessarily mean they should be disqualified for employment,” says Rick Thompson, director of talent management for Rising Medical Solutions, a Chicago-based medical cost-containment and care-management company.
A low credit score also may not indicate anything about job performance if debt problems resulted from a major event such as a divorce or expensive medical procedure.
Moreover, the relevance of a credit report depends on the job in question. For an employee who is not handling money, “you don’t need a credit report,” says Robert Faerber, chief operating officer at Aurico Reports Inc., a background screening firm in Arlington Heights, Illinois.
Sodexo Inc., for instance, rarely does credit checks on potential employees.
“We don’t do credit checks except in extraordinary cases. In the last year, we haven’t done any,” says Arie Ball, vice president of sourcing and talent acquisition at the food and facilities management services company based in Gaithersburg, Maryland.
On the other hand, TW & Co.’s Price sees about 15 credit reports a week. The reports cost $59.99 per applicant as part of a general background check that also includes federal and state criminal records and driver’s license records.
“For our contracts with the United States Air Force, they require us to be particularly mindful of credit reports because applicants need security clearance and a part of that clearance is a credit report to make sure that applicants are leading honest lives,” Price says.
But employers thinking about using credit checks as part of the background-screening process need to proceed with caution. Four states ban the practice—Hawaii, Oregon, Washington and Illinois (effective Jan. 1, 2011)—and 15 other states have proposed similar legislation.
Some studies claim that 70 percent of credit reports contain errors that might cause consumers to be denied credit cards, car loans and even mortgages. But experts contend that the risk of a major error is minimal.
“Unless it’s the wrong Social Security number, the errors are usually minute,” says Dan Chaney, director of HR advisory services at Employers Resources Association, which provides training, legal updates and other HR services to about 1,400 Midwest organizations. “If a credit check comes back poor, the potential employee has a week to dispute and correct the errors.”
Workforce Management, November 2010, p. 7, 9 — Subscribe Now!
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