Credit Reports Should Be Irrelevant to Hiring Decision

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Table of Contents

Abstract
Introduction
Credit reports cause discrimination
Credit reports could have errors
Violation of privacy rights
Limit organizations effectiveness
Impact on minorities
Conclusion
Works Cited

Abstract

Credit reports have been applied in many organizations across the US to make hiring decisions. However, it creates a barrier to accessing jobs and limits organizations’ ability to recruit the most talented and experienced employees. This paper discusses the reasons as to why credit reports should be considered irrelevant in making hiring decision.

Introduction

There are various opinions coming from different stakeholders on how to get people back to work given the high levels of unemployment and job cutbacks. There is a general consensus that more jobs should be created and barriers to accessing these jobs need to be done away with. As a result, the selection process applied by the employers and organizations to determine the suitability of potential employees for various positions, have come under scrutiny. Stakeholders are debating on how to provide solutions to restrictions that limit individual’s ability to obtain jobs by defining what should and what should not be considered when it comes to recruiting employees. The use of credit reports is one issue that needs to be reviewed considering the current economic environment. The use of credit reports involves reviewing credit files of potential employees during recruitment; however, there are many issues on compliance, appropriateness and legal perspectives of their use. Consequently, the question that is still debated remains whether having bad credit makes an individual a bad worker or whether having a good credit report guarantees best performance? I would say no. Having more than ten years or over with good credit in any industry does not guarantee an individual’s proficiency or excellent performance of tasks. There are several reasons as to why credit reports should be irrelevant to hiring decisions.

Credit reports cause discrimination

Credit reports are founded on the premise that there are normally bad credits whenever employers or selection panels are evaluating employment credit reports. In reality, employment credit reports unlike other credit reports used for other purposes such as for loans and mortgages have no score associated with them. An employment credit report only provides history of the individual’s payments as well as debt levels plus a list of public records which include bankruptcies, liens as well as judgments. When an employer or selection team reviews an individual’s credit report, the aim should be to conduct a background check of the individual concerning the job and not separate good workers from presumed bad workers in terms of their credit reports. Employers and selection teams normally conduct screening of potential workers to manage risks associated with the organization’s performance so as to make informed decisions during the selection process. However, most of the information contained in credit reports are not related to the applicant’s job or expected performance, meaning that in most cases, credit reports do not help selection panels and employers in making hiring decisions (Rebecca & Smith 30). Instead, when used, they can result to discriminations against individuals with bad credit reports regardless of their abilities and performance credentials even in positions which do not require the person to deal directly or indirectly with finances of the organization.

Credit reports could have errors

Credit reports are also subject to potential errors since they are based on numerous pieces of data which are collected by human beings and computers from various sources across the United States, thus, mistakes can always occur (Rosen 6). Negative information on the credit reports may also result from disputed bills, dissolution of marriage as well as other problems which are out of the individual’s control. These errors can adversely affect an individual’s ability to obtain employment when a credit report is used. Rosen (8) explains that when such errors occur on a credit report and the job applicant is not able to resolve the issue with the creditor, the applicant can write a letter to credit bureaus explaining the case. However, due to the processes involved in investigation of such issues, the applicant has to wait for as long as 30 days to allow the credit bureau to complete their investigation and resolve the dispute. This could cause the job applicant to miss an employment opportunity especially if the vacancy had to be filled urgently or where many of the applicants to the position were qualified and therefore the wrongly reflected credit report is used to eliminate the applicant.

Violation of privacy rights

The use of credit report is in itself an invasion to an individual’s privacy, hence, a violation of job applicant’s civil rights. A credit report is analysed by a whole selection panel and passes through several hands before it finally reaches the selection panel. As a result, many people including those the applicant may not want to share their financial details with get to know the financial details of the person. This could be worse in organizations which have weak security controls for their information systems. Malicious individuals or hackers can use an individual’s private information/financial details to blackmail the person or for their own selfish gains.

Limit organizations effectiveness

Use of credit reports in the recruitment could also affect an organization negatively. Unnecessary credit reports may discourage potential employees from applying for the vacant positions or participating in the recruitment process (Fray 234). In some cases employers use credit reports as tool for evaluating candidates during the hiring process without determining whether there is a sound business need to obtain applicants’ credit reports. Potential employees may consider credit report discriminatory and therefore may fail to apply for the job. This means that organizations which adopt the use credit reports in hiring processes may limit their ability to employ talented and more experienced employees who can help the organizations better achieve their objectives. Thus, such organizations may not have the capacity to improve their competitiveness in the market.

Impact on minorities

Applying mass credit reports on all individuals who apply for any position in the organization regardless of the requirements and responsibilities of the job may discriminate against some protected classes (Steingold 128). The US constitution protects minority groups including those above forty years and minority tribes. In most cases those aged above forty yeas have several years of experience which come with diverse employment history regarding financial details. Some of the negative information contained in their credit report may have occurred in circumstances out of their control. However, these details form part of what the applicant is judged upon, meaning that protected minority groups could be discriminated against unfairly.

Conclusion

Credit reports are often used as tool for evaluating job applicants in most organizations; however, their use should be reviewed as they could discrimination against job applicants. Again, organizations also limit their chances of employing talented and experienced employees who can drive the company to greater heights.

Works Cited

Fray, John. Encyclopedia of security management. New York: John Wiley & Sons, 2009. Print.

Rebecca, Mazin and Shawn, Smith. The Human Resource Book: An indispensible Guide for Managers and Human Resource. New York: AMACOM, 2011. Print.

Rosen, Lester. Credit Reports and Job Hunting. Employers can request credit reports before making a hiring decision, but applicants should be aware of their rights in this regard. Employment Screening Resources, 2011. Web.

Steingold, Fred. The Employer’s Legal Handbook: Manage Your Employees & Workplace Effectively, 10^th Ed. Berkeley, California: Nolo Press, 2011.

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