Credit where it's not due

Our view: Maryland employers should be able to check a job applicant's background but not necessarily his or her credit history

February 21, 2011

Losing a job for any length of time can have a profound impact on a person's credit history. Even many who did all the right things, from saving money to budgeting frugally, weren't prepared for the worst recession since the Great Depression. Sometimes, bills don't get paid on time.

But at what point should someone's credit worthiness become an impairment to his or her employment? That question is at the heart of legislation before the Maryland General Assembly that would prohibit employers from using a credit history to deny someone a job, fire someone or provide the basis on which to set a salary.

Under current law, screening job applicants is considered a valid use of a consumer credit report. Employers use it as a way to check on someone's background on the apparent theory that a potential employee with poor credit is a liability in the workplace, too.

But studies suggest there isn't much correlation between the ability to pay one's bills on time and job performance. As one lawmaker noted wryly, it's likely that convicted swindler Bernie Madoff paid all his bills when they were due.

On the other hand, criminal background checks are a perfectly valid line or inquiry for job screening. So are court records. Employers should have the right to know if an applicant has been convicted of a crime. But what about knowing a person's child support payment history? Or divorce settlement? Or whether he or she has ever declared bankruptcy? Those personal tidbits, all wholly unrelated to job qualifications, are contained in credit histories.

That so many credit histories are rife with error only underscores the notion that a credit history is no substitute for the due diligence of checking references, scrutinizing past employment history and even double-checking educational background. All are far more meaningful than whether the applicant ever suffered credit card identity theft.

Given that millions of Americans have had to deal with losing a job in recent years, it's no surprise that many states are considering similar credit report reforms. Currently, four states (Hawaii, Illinois, Oregon and Washington) limit use of such reports by employers. As of last month, at least 11 other states are considering taking action, too.

The bill sponsored by Baltimore Sen. Catherine E. Pugh offers employers some exceptions. Financial institutions would still be allowed to run credit checks on those seeking managerial or executive positions, for instance.

Employers wouldn't be sacrificing much, if anything, and job applicants would be given some protection against false and misleading information. That sounds like a win-win, and with recent signs that the economic recovery may be improving, now is as good a time as any to make sure job applicants of good character aren't treated like deadbeats.

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