Friday, January 19, 2007

Bad Credit Equals No Job?

"Lisa Bailey worked for five months at Harvard University as a temp entering donations into a database. When the university made the job a salaried position, Ms. Bailey, who is black, saw a chance to lift herself out of dead-end jobs.

Bailey's superiors encouraged her to apply, she says, but turned her down after discovering her bad credit history.

Bailey, with her lawyer, has lodged a complaint against Harvard charging racial discrimination. The reason: Studies show that minorities are more likely to have bad credit, but credit problems have not been shown to negatively affect job performance.

Some privacy and minority advocates are now seeing credit as a civil rights issue as minorities start to fight employers and insurers who base decisions on credit histories. Their effort could slow the near doubling in credit checks by employers in the past decade, which impacts millions of Americans who are struggling with debt.

"It's definitely a civil rights issue because of the growing use of credit reports and credit scores for hiring, renting an apartment, insurance, and the fact that people of color have not been integrated into the credit scoring system as much as traditional, white, middle-class America," says Evan Hendricks, author of "Credit Scores & Credit Reports: How the System Really Works, What You Can Do."

Credit checks are a growing factor in hiring, with 35 percent of employers checking applicants' credit in 2003, up from 19 percent in 1996, according to the Society of Human Resource Management (SHRM). Typically credit reports are done if a person is going to deal with money, says John Dooney, a manager of strategic research at SHRM." (source)

I don't agree with calling bad credit a "civil rights issue" claiming that using credit in hiring procedures is violating the rights of minorities...

That being said, I think using credit history as a job reference is terrible practice. Anything that happens in life can stain your credit --even if it was beyond your control --and the credit card companies will screw you in a heartbeat regardless of how many years you were a perfect borrower. Your credit report makes no attempt or allowance for explaining why your credit may be to judge someone's potential work ethic by how they handle their money (or have had it handled for them) seems ludicrous to me.

"...So far, there's a lack of data supporting a relationship between bad credit and theft by employees. In perhaps the only study published on the subject, Jerry Palmer and Laura Koppes at Eastern Kentucky University in Richmond in 2003 found no correlation between employee credit reports and negative performance or termination for dishonesty...." (source)

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