Poor Credit = No Job
It's not unusual for banks and other businesses involved in money management to run a credit check on a potential new hire. Their rationale is that handling all that money on a daily basis might prove too great a temptation for an employee with serious personal financial problems. Over the last few years, however, the practice of using credit checks as an employment screening tool has become more common. Use and potential abuse of credit reports to help judge a job applicant's ability to perform on-the-job duties has triggered the concern of the U.S. Equal Employment Opportunity Commission.
This week, the commission began hearing testimony on the use of credit reports as an employment screening tool. With the national unemployment rate pushing 10%, there is considerable concern that low credit scores may be creating a new barrier to employment. Some equal opportunity proponents charge that the practice promotes socio-economic discrimination, unfairly targeting African-American and Latino job applicants, particularly those with low incomes. One of the population segments most in need of jobs, low income earners are being denied entry into the U.S. work force because of low credit ratings that may well have tanked during the financial/housing meltdown. Advocates for low income populations say the use of credit scores to gauge a potential employee's potential job performance creates a vicious cycle from which low income workers can never escape.
Opponents of the employment screening practice are quick to point out that the poor are not the only ones being hurt by credit score screening. Middle class and formerly wealthy job applicants who are struggling to cope with a myriad of recession-driven financial problems have also seen their once admirable credit scores plummet. Layoffs, long-term unemployment, second income loss, high credit card debt, crushing mortgage payments on homes worth a fraction of their former value, foreclosures, bankruptcies - the hits just keep coming, each financial catastrophe leading to the next like knocking over a row of dominos.
It's the post-recession Catch 22. Recession-driven financial problems caused credit scores to fall to "poor risk" levels, but resulting low credit scores are preventing people from getting the jobs they need to climb out of debt and improve their credit scores. The situation dramatizes the need for well-trained credit repair specialists (read hire me here).
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Matt
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