New Demos Report: Job Opportunities Hindered by Employment Credit Checks

While much of the country's attention is focused on the need for job growth, a new report released today by national public policy organization Demos reveals the ways in which the use of credit history in hiring acts as a significant barrier to employment and may lead to discriminatory hiring practices, particularly for people of color and the long-term unemployed. Drawing on new data from Demos' recent National Survey on Credit Card Debt in Low- and Middle-Income Households, Discredited: How Employment Credit Checks Keep Qualified Workers Out of A Job includes first of its kind information on the proportion of jobseekers undergoing credit checks and denied work because of their credit history.

READ THE FULL REPORT: https://demos.io/discredited-report

According to the report, poor credit is associated with household unemployment, lack of health coverage, and medical debt--factors that reflect individual bad luck and the slow economic recovery, not an applicant's likely job performance or financial responsibility. Yet nearly half of businesses report using credit checks in hiring decisions, and it is not limited to high-level managers or those with fiduciary responsibility--many employers require credit checks for low-wage jobs and positions such as retail, maintenance, drivers and tech support.

"What's concerning about this practice is that Americans are being shut out of job opportunities for reasons few would consider legitimate. Our research shows poor credit more often tells a story of personal misfortune far more convincingly than one of poor work habits," says Amy Traub, author of the report and Senior Policy Analyst at Demos.

In accordance with previous research concluding that African American and Latino households report worse credit on average than white households, employment credit checks may disproportionately screen people of color out of jobs, leading to discriminatory hiring. Higher rates of unemployment and disparities in wealth and assets have left Latinos and African Americans with a greater need to borrow for emergencies and at a greater risk for foreclosure or loan default.

Key findings of this report, which surveyed low- and middle-income households carrying credit card debt include:

• 1 in 4 respondents who were unemployed said a potential employer has requested a credit check as part of a job application.
• Among job applicants with blemished credit histories, 1 in 7 has been advised that they were not hired because of their credit.
• Poor credit is associated with household unemployment, lack of health coverage, and medical debt.
• People of color are disproportionately likely to report worse credit--for example, 59 percent of white households in our sample report credit scores of 700 or above, while just 24 percent of African Americans report scores as high.
• 1 in 8 survey respondents who report poor credit cite errors on their credit report as a reason for their poor credit history.

"Consumer credit reports were not originally designed as an employment screening tool, they were developed for lenders to evaluate credit risk. A spokesman for one of the three credit agencies has testified that there is no statistical evidence that establishes any credible link between poor credit and job performance or criminal activity," added Traub. "The practice continues because it financially benefits the companies that market and sell this information to employers, with little concern for the negative impact to the economic security of those with most at stake--low and middle-income Americans struggling to find work in a tough job market."

>>> Read the Report: https://demos.io/discredited-report <<<

Eight states currently have laws restricting the circumstances under which an employer can discriminate against job applicants on the basis of credit history, but federal law permits the use of credit checks. The report urges the passage of strong legislation to ban employment credit checks, such as the Equal Employment for All Act before the U.S. Congress, as well as local and state legislation gaining momentum in New York and Massachusetts. The report also includes recommendations for the Consumer Financial Protection Bureau, the Federal Trade Commission, and the Equal Employment Opportunity Commission.

Discredited: How Employment Credit Checks Keep Qualified Workers Out of A Job is part of Demos' on-going work creating pathways to ensure a strong and diverse middle class. Demos is a public policy organization working for an America where we all have an equal say in our democracy and an equal chance in our economy.