Another obstacle for the unemployed: credit applications

Deleveraging is becoming increasingly difficult for unemployed workers as more companies use detailed credit checks to screen job prospects.

Out of work since December, Juan Ochoa was thrilled when a recruiting firm recently responded to his ad on with an opening for a data entry clerk. Before he could do much more, however, the company checked his credit history.

The interest has disappeared. There were too many claims against him, the company said.

“I didn’t know that today they were going to start checking your credit before you even went to an interview,” said Mr Ochoa, 46, who lost his job in December following the inventory of a mining company in Santa Fe Springs, California. “Why would they need to pull a credit report? They would need something like this if you applied to a bank.

Once reserved for government jobs or payroll positions that could involve large sums, credit checks are now fast, cheap, and used for all kinds of jobs. Employers, who often winnow a large pool of job seekers on nearly 10% unemployment days, view credit checks as a valuable tool to gauge a person’s judgment.

But employment counselors worry that the practice of shunning people with poor credit is unfair and traps the unemployed – who may struggle with foreclosure, live on credit cards and face personal bankruptcy – in a financial death spiral: the bigger their debts, the harder it is to get a job to pay them.

“How to get out of it? asked Matthew W. Finkin, a law professor at the University of Illinois, who fears that the unemployed and indebted are an unlucky class. “You can’t fix your credit if you can’t find a job, and you can’t find a job if you have bad credit.”

Others say the credit check can be used to cover up discriminatory practices. Responding to voter complaints, lawmakers in a few states recently proposed legislation that would restrict the use of credit checks by employers. While some measures languish, Hawaii has just imposed new constraints.

Company executives say they have an obligation to be diligent and protect themselves from employees who may be unreliable, reckless or too susceptible to the temptation to steal, and that credit checks help.

“If I see too many negative things popping up on a credit check, that’s one of those things that raises a flag with me,” said Anita Orozco, human resources director at Sonneborn, a petrochemical-based company. in Mahwah, NJ. She added that while bad credit alone is not a reason to deny someone a job, it could indicate poor judgment.

“If you see a history of poor decision-making, you don’t want that decision-making spilling over into your organization,” she said.

More than 40% of employers use credit checks at least sometimes, according to a 2004 survey by the Human Resource Management Companyup from 25 percent in 1998. The share is almost certainly up today, guidance counselors say.

“It’s an ongoing and growing problem,” said Mollie de Rojas, district coordinator for local operations for the Ohio Department of Employment and Family Services.

Credit counselors, worker advocates and the unemployed argue that a credit check isn’t always relevant to hiring decisions.

“There’s no connection between being a $12-an-hour personal trainer” and having a good credit history, said Janet L. Newcomb, a career counselor in Huntington Beach, Calif. “People are being denied jobs based on things that really have nothing to do with qualifications.

That’s the complaint from Kevin Palmer, 49, who lived for months in the same homeless shelter in Santa Ana, Calif., as Mr. Ochoa. After an interview that seemed to go well one day in June at a property management company, a manager showed him around the office the next day, introduced him to other employees, and showed him an available office.

A credit check later, the offer disappeared.

It was “glorified clerical work, taking complaints from landlords,” Mr. Palmer said of the opportunity, which paid around $39,000 and could have gotten it back on its feet after losing his condominium to foreclosure and bankruptcy filing.

Last month, he says he got a job with a property management company in San Francisco – a company that did not perform a credit check on him.

It is generally legal to perform credit checks on job applicants, but some states have restrictions. In Washington, which has perhaps the strictest requirement, an applicant’s credit history must be substantially job-related under a law that took effect in 2007.

Last month, Hawaii lawmakers approved a measure that generally allows an employer to review a credit history only after making an offer and requires the credit check to be “directly tied” to job qualifications.

In California, Governor Arnold Schwarzenegger vetoed a similar law. (New York law requires the findings of a background check to be work-related, but it deals with criminal records and does not mention credit checks.)

Michigan and Ohio lawmakers have proposed banning employers from using credit histories to make employment decisions.

“In my view, that’s discrimination,” said Rep. Jon Switalski, the Democrat who proposed the legislation in Michigan. “If you miss a few payments or have medical debt, your skills as a pipe fitter or electrician don’t diminish.”

Courts have not favored claims that discrimination is masked by credit checks, said Angela Onwuachi-Willig, a law professor at the University of Iowa. “At what point does someone living in a particular neighborhood or someone having a bad credit score become a means of weeding out people for illegal motives?” she asked rhetorically. “Fundamentally, the courts do not protect against discrimination by proxy.”

Stuart J. Ishimaru, acting chairman of the Federal Equal Employment Opportunity Commission, said the commission would likely issue guidelines on the proper use of credit checks. Such guidelines, while not binding, could provide some insurance against legal action for employers who comply.

“It’s something that intrigues and worries us,” Mr Ishimaru said, adding that some job-related tests have led to discrimination complaints in the past. “The question is, why are you using it? How is this a good screening device? »

Federal law requires employers to obtain consent from job seekers before performing credit checks, said Pamela Q. Devata, an attorney in the Chicago office of Seyfarth Shaw.

And if they’re considering denying someone a job based on a check, she said, “they have to let the candidate know.” This is meant to give someone a chance to explain the circumstances or spot misinformation.

When the job market improves and fewer people fight for slots, credit history can become less important, said Michael C. Lazarchick, a career counselor in Pleasantville, NJ “But these are tough times. and averages.”

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