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.
Often you have no control over what's posted about you online. You can contact the websites and ask them to remove the information, although that's not likely to happen if the site is a news organization, Reitman says. You can also launch a blog or post comments through Twitter so that this information appears on top of online searches and the unflattering information is pushed down, she says.
Review credit reports Regularly check your credit report to make sure the information is accurate.
No recent studies have been done to determine how often mistakes occur. A 2004 U.S. Public Interest Research Group survey found that a large majority of reports had mistakes, with one-quarter of records containing errors serious enough that credit could be denied.
Under federal law, you can order a free annual credit report from the three major credit bureaus at AnnualCreditReport.com or 877-322-8228. State law allows Marylanders to get free annual reports from TransUnion (800-916-8800), Experian (888-397-3742) and Equifax (800-685-1111).
You also are eligible for free annual reports if you don't have a job but will be looking for one soon.
If you find an error, notify the credit bureau in writing and send along copies of paperwork to substantiate your claim. The credit bureau generally must investigate your complaint within 30 days. If the source of the information agrees an error was made, it must notify the credit bureaus so they can fix their files.
You also can ask the credit bureau to send a corrected copy to any employer in the past two years that received the erroneous report.