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Ban Credit Checks for Job Applications

Chris at The Consumerist [3] referenced a story this week about how there are 16 states, including here in Maryland, considering a ban on using credit scores to make hiring decisions [4]. Iv’e never personally experienced this or heard of a friend get denied a job because of their credit score, but this happens enough to warrant 16 states barring the practice.

What’s the logic behind credit checks? I’ve read everything from “a higher credit score means someone is more trustworthy” to “someone who has a higher credit score is more reliable,” but I doubt any company can substantiate that with hard data.

If someone wants to hire you because they believe you are the best candidate for the job, they will. If they are iffy about it, then they might use the result of a credit check to help them make a decision even though job performance and credit score are not related. I also agree with Reznik’s quote that “People lose their jobs, that naturally precipitates them getting behind on bills, their credit scores go down, they are trying to find a job to pay off the bills, and employers won’t hire them because of their credit score.” It’s a vicious catch-22.

As an aside, I also like the idea of banning credit checks for job applications because credit scores have become a bit of a joke. Credit scores lose some of their predictive value when they become known because people can game the system. They start behaving differently because they know how things will affect their score so the predictive value of that score goes down.

But, until they pass a law, it’s another reason why you need to review your credit report annually [5] and if you’re itching to know your score, I use Credit Karma [6] (it’s a free TransUnion score, no trial BS, 100% free).

(Photo: dcvision2006 [7])