Credit Checks: A State or National Issue?

One issue that has many divisive over background checks is the use of credit history. One theory behind this method suggests that credit history correlates with work performance, and those with good credit make good workers. But, does this theory hold true in a damaged economy, in which once-good workers were laid off and, for over 12 months, have not been able to find employment and pay their bills? For such workers, passing the credit check portion of a background screening is often an obstacle that may get them passed over for a position. Although not as common as a standard criminal background check, credit history is still examined 60 percent of the time for potential hires.

Currently, Hawaii, Washington state, and Oregon all have laws limiting credit checks in employment, but this isn’t the case with all states. However, a recent article mentions that an amendment to the FCRA has been proposed that would prohibit employee credit checks nationwide, with the exception of certain circumstances. Mainly, does having good credit pertain to a job? While credit may be irrelevant to the job performance of an editorial assistant for a fashion magazine, is it for a mid-career financial advisor?

In a stable economy, the theory that credit translates out to job performance and lower likelihood of committing fraud on the job makes some sense. But, after a recession, does this theory still apply to many workers looking for a position and, essentially, looking for a way to get back into the working world and repair their credit? If any legislation is passed regarding credit checks for employment, the significance of a person’s financial history should correlate strongly with the position – not tenuously. Aside from this factor, criminal history, references, and the interview should hold much more weight than a candidate’s financial history while being unemployed.