For the estimated 145.5 million Americans affected by the hack on credit reporting agency Equifax, they will not only have to reckon with fraudulent activity in their credit history in the months and years to come, but also with an unfair side effect: having to explain that fraudulent credit history to potentially unsympathetic employers.
According to a 2012 survey by the Society for Human Resource Management, nearly half of employers are subjecting job candidates to credit checks. Forty-seven percent of employers admitted to checking job applicants’ credit reports as part of the hiring process.
That’s because, whether you like it or not, employers often look at your credit history before choosing to hire you. The Equal Employment Opportunity Commission prohibits employers from having a “financial requirement if it does not help the employer to accurately identify responsible and reliable employees,” but if an employer can prove that the credit check is relevant to the job, they can go ahead and look up your credit background.
Of course, you have to consent to have this searched, but if you want that job, it’s not much of an option.
Research shows credit reports a poor indicator
What’s especially troubling about how many employers use credit reports is that research shows the information contained therein has almost no predictive power as to what kind of employee someone will be. The information in the report may be flat-out incorrect or have activity out of your control, such as hack-related debt. One in four credit reports has an error, according to the Federal Trade Commission.
Use of these reports may also say more about an employers’ biases than they say about your qualifications. A 2017 study found that employers go beyond the numbers — worryingly, these reports can become jump-off points for hiring managers to engage in “moral storytelling.”
“My research suggests that the moral distinctions employers draw vary according to their own life experiences — carrying student loans, say, makes one more empathetic to candidates struggling to pay off their education debt — as well as according to their class, gender, and perhaps even race,” she writes about her conclusions for The Atlantic.
As accurate as tea leaves
Although these managers’ conclusions can be as accurate as fortune telling at predicting a candidate’s qualifications, they can be used to conclusively shut out good candidates from being hired.
Unless credit reports are banned for use in the hiring process or employers wise up to their lack of predictive power, this will remain an unfair bind for job seekers: damned if they disclose, damned if they opt of good jobs asking for this sensitive, too-often wrong and misleading information.