Americans are denied jobs because of credit checks.
A nationally representative survey by Demos finds that among low- and middle-income households with credit card debt, one in four unemployed Americans has been asked to submit to a credit check as part of a job application.2 One in ten job applicants in this survey group were told they would not be hired for a position because of their credit.3
Credit checks were never designed to assess potential job performance—or measure character.
Credit reports were developed to help lenders assess the risks associated with making a loan. Over the last few years, they have been aggressively marketed to employers as a means to gauge an applicant’s character or likelihood to commit theft or fraud. Yet there is no proven link between personal credit reports and criminal behavior or performance of a specific job.4 A spokesperson for TransUnion, one of the major credit reporting companies, admitted in 2010: “We don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”5
A weak or poor credit history is often linked to medical debt and unemployment.
Research by the Federal Reserve Board finds that more than half of all accounts reported by collection agencies on credit reports consist of medical debt.6 Demos’ study of Americans with credit card debt similarly finds that poor credit is associated with lack of health coverage and medical debt as well as household unemployment.7 Unemployed workers in particular can become trapped in a Catch-22: job-seekers are unable to secure work because of damaged credit and are then unable to escape debt and improve their credit because they cannot find work.
Employment credit checks can have a discriminatory impact on people of color.
Research from the Federal Trade Commission, the Federal Reserve Board, and other investigators concludes that African American and Latino households tend to have worse credit, on average, than white households.8 Racial disparities in credit history may reflect the damage done by predatory lending that continues to target communities of color, as well as the enduring impact of racial discrimination in employment, lending, education, and housing. One result is that when credit history is used to evaluate job candidates, people of color may disproportionately be screened out. Numerous civil rights organizations, including the NAACP, National Council of La Raza, and Leadership Conference on Civil and Human Rights, have publicly op- posed the use of employment credit checks.9