August 9, 2012
Survey: Fewer employers using credit checks to screen applicants
Long-term job hunters whose credit ratings have suffered may take heart from a new employer survey that found less use of credit background checks.
The Society for Human Resource Management reports that fewer employers than two years ago are screening applicants' credit histories.
Furthermore, among employers that use credit checks, 8 out of 10 said they had hired candidates who had poor credit reports, and two-thirds said they allowed candidates to explain why their credit information was negative.
According to the 2012 report, 53 percent of U.S. employers don't use credit background checks when evaluating job candidates. That was a hefty increase from 40 percent in 2010 and 39 percent in 2004 who said they didn't use them.
"Human resources professionals are looking more closely at the job-relatedness of these practices," says Mark Schmit, the society's vice president of research, explaining some of the reduction.
In other words, if a job involves handling money or is in law enforcement, a credit check is likely to be relevant, and employers are continuing to do that kind of background research.
But if personal money management has little relevance to the job's duties, credit background checks are less likely, the research found.
Among employers who said they conducted background checks, the survey found that 91 percent of credit checks were conducted after a contingent job offer or job interview -- not as an initial screening practice.
The survey's findings also suggested that negative credit reports weren't a routine barrier to hiring.
In other findings, the survey determined that credit histories of two to seven years were the most common period checked.
Two years ago, 17 percent of the employers said they looked at all years of credit histories. This year, that plummeted to 6 percent.
The declining use of credit checks also reflects passage of laws in several states -- including Washington -- that limit employers' use of credit checks as an employment-screening device.
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