States may ban credit checks on job applicants

ANNAPOLIS, Md. -- It's hard enough to find a job in this economy, and now some people are facing another hurdle: Potential employers are holding their credit histories against them.

Sixty percent of employers recently surveyed by the Society for Human Resources Management said they run credit checks on at least some job applicants, compared with 42 percent in a somewhat similar survey in 2006.

Employers say such checks give them valuable information about an applicant's honesty and sense of responsibility. But lawmakers in at least 16 states from South Carolina to Oregon have proposed outlawing most credit checks, saying the practice traps people in debt because their past financial problems prevent them from finding work.

"These days, you almost expect people to have credit problems to a certain degree," said Chris Biaggi, president of All-Western Mortgage in Las Vegas. "With the current economy and the way the housing market is in this town, people's credit is not necessarily a reflection of how they'll do their job."

Wisconsin state Rep. Kim Hixson drafted a bill in his state shortly after hearing from Terry Becker, an auto mechanic who struggled to find work.

Becker said it all started with medical bills that piled up when his now 10-year-old son began having seizures as a toddler. In the first year alone, Becker ran up $25,000 in medical debt.

Over 4½ months, he was turned down for at least eight positions for which he had authorized the employer to conduct a credit check, Becker said. He said one potential employer told him, "If your credit is bad, then you'll steal from me."

"I was in a deep depression. I had lost a business, I was behind on my bills and I was unable to get a job," he said.

Hixson calls what happened to Becker discrimination based on credit history and said his bill would ban it.

"If somebody is trying to get a job as a truck driver or a trainer in a gym, what does your credit history have to do with your ability to do that job?" Hixson said. He said he knows of no research that shows a person with a bad credit history is going to perform poorly.

Under federal law, prospective employers must get written permission from applicants to run a credit check on them. But consumer advocates say most job applicants do not feel they are in a position to say no.

Most of the bills being proposed this year resemble laws in Hawaii and Washington that prevent employers from using credit reports when hiring for most positions. The laws contain exceptions in cases in which such information could be relevant to the job -- for example, if the person is applying to work in a bank or an accounts-payable office.

On a national level, Rep. Steve Cohen, D-Tenn., introduced a similar bill last summer in Congress, where it is still bottled up in committee.

Rep. Dina Titus, D-Nev., said she thinks employers should have access to relevant information that can help them hire the best workers. However, businesses need to understand that a credit score may not be the best way to measure an applicant's talents and potential, she said.

Titus said many Nevadans have seen their credit scores downgraded during this economic crisis through no fault of their own. The state has a higher-than-average foreclosure and unemployment rate.

Even though more companies are using credit checks, only 13 percent perform them on all potential hires, the Society for Human Resources Management's most recent survey shows.

Michael Nigro, president of Nigro Construction in Las Vegas, said he didn't check the credit history for any of his 15 employees, but he could see where it might be a valuable tool for employers.

"If I was interviewing a candidate and saw he had an extensive amount of debt, could he be a potential problem? It depends on what kind of job you're going for," Nigro said. "It says a lot about people. We don't focus on that. We focus on experience."

Biaggi of All-Western Mortgage said he's tightened "quality control" at his company, taking steps to make sure loan officers verify accuracy of borrower information on loan packages. These are desperate times and people do things they might not normally do, he said.

Review-Journal writer Hubble Smith contributed to this report.