Apply for a job and you'll likely be asked to agree to a credit check.
A majority of employers conduct credit checks on all or some of their job candidates. But this screening has become so controversial given the weak economy that the Equal Employment Opportunity Commission last held its first hearing devoted to credit checks last week.
Consumer advocates argue that credit records have nothing to do with job performance and that their use could disproportionately hurt minorities, who have higher unemployment rates and, thus, spottier credit. Employers counter that credit checks are a valuable tool at a time when it's hard to get honest references.
Job hunters with damaged credit from being out of work are in a tough spot. An employer must get their consent to do a credit check, but applicants likely won't refuse for fear of not getting hired. That makes it all the more important for job seekers to know their rights and to make sure credit reports and other public records don't contain errors that could cost them a job.
Even if you are employed, you need to be vigilant about your credit. Employers may conduct a credit check when deciding to reassign, promote or fire you.
Credit checks have been going on for decades, but their use has become more common in recent years. Sixty percent of employers now conduct credit checks on all or some of their job applicants, according to a survey this year by the Society for Human Resource Management.
Companies usually conduct credit checks if an employee will be handling customers' money or sensitive information, employer representatives told the EEOC. The concern is that workers with money troubles or gambling debts might be tempted to steal from the company or customers.
Most of the time employers using credit checks will conduct them only after an interview or a conditional job offer has been made, Pamela Devata, an employment lawyer who counsels companies, told the EEOC.
One reason companies use credit checks is that it's difficult to get meaningful references, Devata says. Former employers are reluctant to say anything bad about an ex-worker for fear of being sued, while websites have popped up offering fake references, she says. (Buyajobreference.com, for example, states, "We'll tell them whatever you want us to.")
"Employers are struggling to get good information," Devata says. Managers also won't hold debt accrued from a divorce, health issues or a job loss against applicants, she says.
Worker advocates are skeptical.
Employers have a "misguided reliance on credit checks," which don't offer insights into a worker's character, says Sarah Crawford with the Lawyers' Committee for Civil Rights Under Law. Crawford told the EEOC that a 2004 study found that workers with good credit reports were no more likely to get better performance reviews than those without stellar records.
Employers must notify you in advance if there is anything in a credit report that would lead them not to hire you. You have a right to a free copy of that report and the opportunity to challenge and correct the information.
The EEOC has received only 40 complaints since 2004 from workers about credit checks. Chi Chi Wu, staff attorney for the National Consumer Law Center, says she suspects that employers often don't notify candidates that there's a problem with their credit, so workers denied jobs don't know to complain.
Despite the debate, credit checks aren't likely to go away. Legislation to ban credit checks for certain jobs has been languishing in Congress since last year. Only four states restrict the use of credit checks for employment. Maryland considered limiting their use earlier this year, but the legislation died.
If you're worried credit issues might affect your job search, here are steps to take:
See what employers see Employers look at more than just your credit history. Background checks can include information from public records about liens, judgments, bankruptcies, evictions, criminal convictions, real estate holdings, driving records and insurance claims.
Fortunately, the same law that allows you to get free annual credit reports entitles you to free reports yearly from certain information brokers. For example, order a free "Full File Disclosure" report from LexisNexis by downloading the request form online at personalreports.lexisnexis.com.
You can dispute any information that's incorrect with LexisNexis.
Google yourself Some employers simply put a candidate's name in a search engine to see what pops up.
"You need to find out what is written about you on the Internet," says Rainey Reitman, spokeswoman with the Privacy Rights Clearinghouse.
Check your name under search engines. You might find that your Facebook profile is open to all, in which case you can change the privacy setting or delete information you don't want prospective employers to see, she says.