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July 23, 2009


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I wonder about the legality of that ... aren't there limits to what the credit score can and cannot be used for? Maybe one of the resident lawyers that reads this blog can tell me that.

Regardless, I think there are limits in terms of what it should and should not be used for.

I 100% agree with the gospel of FMF that we should spend less than we earn, watch our finances, save and invest prudently, and have a long-term plan - basically, take care of our own business.

But I question the relevance of that when evaluating candidates for anything other than maybe a finance manager / controller type job.

Bad_Brad --

I've never used a credit score in a hiring decision, but I can see how it could be used to at least estimate the characteristics noted above (judgment, etc.) as well as general responsibility, self-control, and even a tendency to steal (from the company if things got really bad.) Not saying I do/believe this, but that I can see how others can and it's an issue we all need to consider.

Now if you do all the things I talk about (that you detailed), it's a moot point anyway as all should be well with your credit.

Most employers that use credit checks include a release in the employment application that you submit. This makes it permissible for them to check your credit.

For jobs requiring a security clearance, the credit check is part of the process. Mostly they are looking for things like large still outstanding debt that could be used to blackmail.

I actually had no idea that employers did that, I guess it makes sense, but does anyone know if they do that in Canada? How does that work? Because I know in Canada we do not have to give our SIN numbers out until we are hired (SIN # is the same as social security number), are Americans required to give out their social security number BEFORE being hired?

I hope this does not happen to me. I messed mine up in college. I am not the same person now. I actually am educated about personal finance but I still have not made enough money to pay it off.

We do background and credit checks at the company I work for. I'm now hiring staff. I've had 4 open positions and just filled 2 of them and looking for two more. We have NOT hired 5 applicants that we would have otherwised hired because of negative items on their credit reports. We do not use fico scores, but do look for outstanding, long owed debts.

Because we deal with credit cards and social security numbers, the logic is to find people that are not in the rears with debt, that might be tempted to steal information. (Of course the fact that someone has an outstanding unpaid debt does not mean they will steal.)

Another major issue is that when we ask for permission to run these reports, we ask the applicant to tell us if there are any issues they want us to know about. In 3 of the 5 applicants I couldn't hire, they said that they were current with all debts. Unfortunately the fact that they didn't disclosue accurate information played a part in not hiring them.

As the person having the conversations, it is very uncomfortable and one aspect of the interview process that I do not enjoy.

I don't believe the federal government runs credit checks on job applicants unless the job requires a security clearance.

Cyn, I'm not sure why you think job applicants have a duty to disclose their personal debts to you. I don't know that there's any evidence that people with bad credit are significantly more likely to steal from their employers than anyone else. It's one of those "common sense" links that I suspect doesn't really stand up to close inspection. I bet Madoff had excellent credit.

I'm in a hiring position but have never used a credit check. To my knowledge my company (a Fortune 500) does not do this practice. However I think it is justified especially for accounting/finance type jobs due to their exposure in handling the companies money.

I'm privy to my company's internal investigations and industry trends. You would be shocked to know the amount of corruption, embezzlement and other schemes employees use to steal from companies. Greed is a major cause but investigation often find crimes occur by employees in financial trouble. By hiring people who have clean slates a company can reduce potential internal crimes and therefore save itself money. That is probably the thought behind this practice.

Cyn94601- Do you go back to the applicant after checking the credit report and let them know what you found? I'm just concerned because there are so many incorrect things on people's credit reports. I am the guardian of an elderly woman who really messed up her finances. In order to talk to her credit card companies, etc. to get things straightened out, I had to give them my ssn and the rest of my information. They incorrectly put her information on my credit report. While I've been disputing it with the credit reporting agencies, I've not gotten anywhere. It isn't MY money mistakes giving me bad credit, it's hers. I never knew it until I requested a free credit report. I wonder if some of the things that are causing you not to hire might be incorrect.

Sorry, but my credit was trashed when I had an extended hospitalization and loss of income (because I was unable to work).

Since returning to work (relocating and starting a new job), I have been handling money regularly as a convenience store cashier, with nary a problem.

However, on my minimum wage income, while I am currently living within my means, I can't resolve the old debts.

Why should I be stuck in a dead-end job ghetto the rest of my life because an extended illness trashed my credit?

I guess I'm not seeing a legitimate connection between bad credit and employment.

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