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Employers still looking at credit reports during hiring process

Two realities resulting from the abysmal state of the economy are unemployment and financial hardship. The two often go hand-in-hand for folks in San Diego, creating quite a paradox: an unemployed person needs a job to pay for his or her monthly bills, yet those mounting bills may be doing damage to their credit reports, which can negatively impact one's ability to get a job if an employer pulls the applicant's credit report.

What about employee rights, though? Can employers look at job applicants' credit reports and use these reports against workers during the hiring process? What if an employer pulls a report that has an error on it and makes some wrong assumptions when choosing not to hire someone because of his or her credit history?

About 47 percent of employers in the U.S. include credit report checks in the background checks they do on potential new hires. The practice is most common in occupations involving handling money or those involving handling sensitive information, but the practice of pulling credit reports on potential hires isn't exclusive to those fields.

One man looking for work selling shoes didn't get several jobs he was qualified for because medical bills exceeding $50,000 had forced him to file bankruptcy. The president of one outplacement consulting firm explains that employers think an applicant's credit history speaks to his or her character, specifically responsibility.

Only eight states including California currently restrict how credit reports may be pulled and reviewed during the hiring process, and legislation is pending in several other states.

It is understandable that some employers do need to make sure their employees are responsible with finances and handling sensitive information based on the nature of their work. In some cases, a credit report may help when making hiring decisions. However, employers must be careful not to assume that a ding on a credit report means that a job applicant is not qualified for a position. Employers must also be careful about what they say regarding an applicant's credit report and credit history.

Source: CBS MoneyWatch, "Bad credit ratings sinking job hunters," Kathy Kristof, Feb. 6, 2013

  • Our Southern California firm handles a variety of complex employment law and job rights issues, including cases that involve defamation or the violation of an employee's privacy rights. To learn more about employees' rights, please visit our San Diego employment law attorneys page.