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1000-4999 post queen of hearts
Join Date: Nov 2005
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Interesting article on this topic:
Quote:
The Basics
How bad credit can cost you a job
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Many employers -- including the federal government -- routinely scour credit reports on current and prospective employees to help decide who's hired or fired. Here's what you need to know about the risks.
By Liz Pulliam Weston
After two years of unemployment and three years as a contractor, Richard Becraft was offered a good civil service job with the Department of Defense in May 2002. The position paid $12,000 more than he was currently making and promised the kind of stability Becraft hadnt experienced since defense industry layoffs, a divorce and a subsequent personal bankruptcy rocked his financial world.
After a background check, however, the job offer was rescinded. The government letter that the Oxnard, Calif., man received indicated financial considerations made him a poor security risk.
The idea, Becraft said, was that his past financial troubles made it more likely I could be bribed . . . to disclose the secrets of this nation.
Becraft believes the denial was unfair -- particularly since federal law specifically prohibits an employer from using a bankruptcy as a reason not to hire, promote or keep a worker. Although employers can use other credit problems such as defaults or collection actions in their hiring decisions, Becraft insists his credit report was free of any negative marks until the bankruptcy.
I had excellent credit until then, he said.
Credit checks for job applicants
Government workers arent the only ones whose credit histories are being scrutinized. Anyone who has had trouble paying bills could find his or her finances endangered again as employers use credit information to help decide who to hire, fire or promote.
There are some indications such credit checks are on the rise. About 35% of the companies surveyed by the Society for Human Resource Management pulled the credit reports of current or potential employees last year, up from 19% in 1996.
Other experts say employers are far more interested in other kinds of background checks, including identity verification and criminal histories. (For more information on background screening, see Secrets you can keep from your employer.)
Five years ago, nearly all employers who bothered to do background checks wanted a credit report pulled, said James Lee, chief marketing officer of ChoicePoint Inc., which does 6 million background checks annually. Today, far more employers are screening their workers, Lee said, but fewer than 30% of ChoicePoints customers want credit information.
Credit has not turned out to be a good predictor of workplace theft. This is what our customers are telling us, anyway, Lee said. A better predictor is a criminal history involving bounced checks.
Lie on the application, lose the job
Job applicants are much more likely to lose a job because they have a recent criminal history or they lied on an application about their identity, experience or education, said William Greenblatt, CEO of Sterling Testing Systems Inc., a New York City background checking firm.
Of the 10,000 adverse action letters we send out monthly, very few of them are credit related, Greenblatt said. Its less than 5%.
Employers are more likely to use credit reports as a way to verify employment history and Social Security numbers, Greenblatt said. Lenders often verify employment when you apply for a loan or credit card, so a credit report is seen as a good way to double check the employers listed on a job-seekers application.
The federal government still routinely requests credit checks for employees, Lee said, but typically denies jobs or promotions only when the employee would have direct access to cash on the job, or security clearances are involved.
Clean up or clear out
You dont have to work directly for the government to be affected by its credit checks, however. Gene worked for a consulting agency that was hired to do some work for the IRS in Philadelphia. Two months after he started the IRS job, a government investigator told him his poor credit was endangering his position.
I was advised to clean up my credit report if I wanted to remain a consultant, Gene said. They gave me a month. There's not a whole lot you can do to straighten up your credit in month.
Gene insisted his credit wasn't that bad to begin with . . . no defaulted student loans or bankruptcies or anything like that. But four months after he was hired, Gene said his employer told him not to report to work anymore.
Know your rights
In the private sector, the people most likely to have their credit reviewed are those who will deal with cash or valuables, or who are financial executives, said Greenblatt, a labor attorney with 26 years experience in employee testing and screening.
Bank tellers, CFOs (chief financial officers), controllers, people who work for brokerage institutions, financial institutions, he said. Jewelry manufacturers do credit checks . . . when youre dealing with diamonds, theyre easily concealed (and stolen).
If youre concerned about your credit history affecting your job prospects, heres what you should know:
An employer needs your permission to run a credit check. The Fair Credit Reporting Act (FRCA) requires your written permission any time an employer hires a third party to conduct a background check, said human resources consultant and attorney Wendy Bliss. That includes running a credit report. Of course, you likely wont get the job or promotion if you dont agree. But failing to get your okay is an FCRA violation, said Bliss, author of Legal, Effective References: How to Give and Get Them."
While other black marks can be used against you, technically a bankruptcy cannot. Under Title 11 of the U.S. Code, employers are prohibited from discriminating against someone who has filed for bankruptcy. Since most people have trouble paying their bills before they file, this is often a moot point -- the employer can point to that history as the reason for the adverse action. If an employer makes the mistake of citing your bankruptcy as the reason you were fired, not hired or denied a promotion, though, you might want to consult a labor attorney about a lawsuit.
An employer is supposed to tell you if credit information is used against you. If an employer uses credit information to deny an applicant a job, fire a current employee, rescind a job offer or cancel a promotion, federal law requires the employer to do two things:
Before the adverse action is actually taken, the employer is supposed to provide the worker with a copy of the report and an explanation of the workers FCRA rights.
After the action is taken, the worker must be told which company provided the credit information, given contact information and told he or she has a right to dispute the reports accuracy.
Rather than go through all this, of course, many employers simply find a less complicated excuse to give you.
Your ability to dispute the information may be of limited use, as well. If your employers decision was based on erroneous data in your credit report, for example, it could take you months to get the problem corrected -- by which time someone else will have been hired for the position you wanted.
Find out what's on your record
Thats another reason why its important to check your credit reports at least a couple of times a year and challenge any serious errors you find.
All that said, a couple of late payments arent going to kill your job prospects. Employers who care about credit histories typically look for serious negative marks, such as collection actions, repossessions, foreclosures and evictions. Some are wary of people carrying enormous debts or otherwise indicating theyre living well beyond their means.
If your credit problems arent serious and relatively recent, most employers arent going to care, Greenblatt said.
All good employers are looking for good people, Greenblatt said. Theyre not looking for reasons to disqualify people.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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