By Chris Isidore, senior writer CNNMoney
NEW YORK (CNNMoney.com) — Falling behind on your bills? It could cost you a job.
An increasing number of employers are using credit checks to screen potential job applicants. So missed payments on your mortgage, car or credit card could keep you from getting hired.
According to a survey by the Society for Human Resource Management, 60% of employers are using credit checks when filling at least some of their openings. Only 35% reported checking credit in a 2003 survey, and only about 13% did so 1996.
The timing could not be worse.
“At exactly the time everyone’s credit seems to be going down the toilet, more and more employers are using this,” said Nat Lippert, research analyst for the union Unite Here. “You get in a Catch-22: You can’t pay your bills because you don’t have a job, and now you can’t get a job because you can’t pay your bills.”
Unite Here has been active in a recent push for laws to greatly limit employer’s use of the credit reports in hiring decisions.
So far three states have passed such laws — Hawaii, Oregon and Washington, and legislation has already passed in Illinois and is headed to the governor. The laws would make it illegal for employers to access credit history unless they can show that it’s relevant to a job’s duties, such as handling money or having access to customers’ financial information.
Bills have been introduced in 16 other states and the District of Columbia, and Federal legislation is currently pending in Congress.
Businesses have pushed back hard against such laws.
“Is it helpful to the employment process? Employers seem to think yes. They don’t spend money on products they don’t think bring value” said Stuart Pratt, CEO of Consumer Data Industry Association, the trade association for the credit rating agencies.
Pratt says that a credit check gives employers details about accounts in collection, debt levels, bankruptcies and other problems that would cast doubt on someone’s ability to handle responsibility. It does not report credit scores or account numbers.
Pratt also argues that the credit histories are only one factor considered by employers, and that prospective employees are supposed to be given the chance to respond to what their credit check turns up.
But consumer advocates and some job seekers say that candidates are being unfairly judged by the circumstances of their private lives.
“Employers have adopted this method as a proxy for character reference, believing it reflects on people’s ability to handle responsibility,” said Ben Woolsey, director of marketing and consumer research for CreditCards.com. “That’s a bit of a reach.”
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