Jul 5

Why Do Employers Check Credit Reports?

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Virginia is one of several states that has no laws restricting pre-employment background checks. Around the country, 47% of employers surveyed by the Society for Human Resource Management in 2012 reported that they do check the credit scores of prospective new hires. This is down from 60% in a 2009 report. It is not unusual for job applicants to have poor credit histories in a weak economy, but it may sound unusual for a prospective employer to inquire about a candidate’s credit. After all, what does a credit report have to do with the position being applied to? Is this grounds for discrimination?

Employers Value Credit Checks

Your credit report contains important information about your past and present credit accounts. An employer who inquires about your credit report receives a summarized version of the report that excludes information that would violate equal opportunity laws. This action does not hurt your credit score as it is a “soft” inquiry.

What an employer may see are unpaid bills, bankruptcy, foreclosures, and any recent credit and loan applications, among some other data. Many employers insist that this information helps them screen applicants, as many employers may believe that good credit is a strong indicator of a responsible adult.

Employers hiring for positions involving access to funds, trade secrets, and otherwise sensitive information are more likely to request a credit report than employers hiring for other positions. The credit industry also asserts that bad credit could indicate a bad employee or corporate criminal. The Association of Certified Fraud Examiners found that two common red flags for potential fraud are employees who live beyond their means and employees who are currently experiencing financial difficulties. As such, employers believe that a person with bad credit carries a higher risk of engaging in fraudulent activity.

Not everyone is convinced that this is the case. In fact, many believe that credit agencies have a financial incentive to push employers to pursue credit inquiries. There is currently no confirmed link between poor credit and poor work ethics. Several states have introduced legislation to restrict or completely ban the use of credit reports when making hiring decisions, but for the majority of the nation, including Virginia, it is a completely legal form of discrimination.

Discrimination for other factors, however, such as a person’s sex, gender identity, and sexual orientation; race or national origin; religion; age; disability; military service; pregnancy; and/ or genetic information is not permitted under state and federal laws. Speak with the compassionate attorneys at Bertini Law to discuss your potential discrimination case in Virginia Beach. Call (757) 222-9165 or contact us online.

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