Menus Subscribe Search

Follow us


Bad Credit Reports Put Job Seekers in Catch-22

• June 03, 2011 • 4:00 AM

More employers are subjecting job applicants to credit checks as a tool to determine honesty and responsibility, but is that accurate, or legal?

“There was only one catch and that was Catch-22 … Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane he had to fly them. If he flew them he was crazy and didn’t have to; but if he didn’t want to he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.”

Catch-22 by Joseph Heller

Heller’s famous conundrum is often misapplied to situations that are troublesome but not impossible. Today, as the economy continues to spin its wheels, there’s a closer fit.

Take the plight of Patricia Rosa. As reported by The Wall Street Journal‘s Kristen MacNamara, “After three rounds of interviews for a sales position with Prudential Insurance Co. of America, Patricia Rosa received a letter in February saying her job application was denied based on information from a background check she authorized the company to conduct. The only blemish on her record, she says: Poor credit that built up since she lost her job two years ago.”

“Simply put,” Chi Wu, a National Consumer Law Center attorney, told a federal panel last October, “a worker who loses her job is likely to fall behind on paying her bills due to lack of income. With the increasing use of credit reports, this worker now finds herself shut out of the job market because she’s behind on her bills.”

Citing the catch-22 analogy, she said, “A simple reason to oppose the use of credit history for job applications is the sheer, profound absurdity of the practice. Using credit history creates a grotesque conundrum.”

Terry Becker, an unemployed Wisconsin auto mechanic, saw his credit rating crater as a result of $25,000 in medical bills incurred by his 10-year-old son’s treatment for seizures. Late in 2009, Wisconsin State Rep. Kim Hixson (D-Whitewater) responded by introducing legislation to address Becker’s dilemma.

“If somebody is trying to get a job as a truck driver or a trainer in a gym,” Hixson asked, “What does your credit history have to do with your ability?” Hixson’s bill never made it out of the Wisconsin Senate last year, and in November, the two-term legislator was not re-elected. But his question is echoed by state representatives in Connecticut, Georgia, Illinois, Indiana, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina and Vermont. Laws forbidding the practice are on the books in Hawaii and Washington.

Employers say having prospective employees allow them to conduct credit checks gives them valuable information about an applicant’s honesty and sense of responsibility.

“An employer always takes on a degree of risk when hiring anyone,” argued a blogger at Boots & Sabers in a post that called Hixson’s bill anti-business. “It’s impossible to know everything about a person before hiring them. Looking at someone’s credit history is just one way to evaluate whether a person is right for the job. Of course, it depends on the job. Someone’s credit history may not matter a bit if you’re hiring factory line worker, but it’s certainly relevant when hiring a CFO. Given how costly and disruptive a bad hiring decision can be, the government should allow employers as many tools as possible to try to make a good decision.”

In February 2009, Eric Rosenberg of the credit bureau TransUnion testified before the Connecticut Legislature in defense of the practice. He pointed out that employee theft causes retailers to lose more than $30 billion each year. He maintained that a third of all employees lie on their job applications, and said more careful pre-hire screening is designed “to protect the safety of Connecticut residents.”

But lawmakers in the states listed above say the practice traps people in debt because their past financial problems have little or nothing to do with virtue.

Connecticut State Rep. Matthew Lesser (D-100th) put it more colorfully in 2010 when he introduced a bill to limit employers’ use of credit reports. “Bernie Madoff had a pretty good credit score,” he said, “and yet there is this consistent message that if you have a bad credit score, there is something wrong with you.” (For the record, employers’ use of credit histories don’t actually use a credit score, which is not made available to them. An earlier version of that story did not make this clear.)

“Using a job applicant’s credit history to deny employment is not fair because personal credit history is not an accurate predictor of job performance,” argues U.S. Rep. Steve Cohen (D-Tenn.), who in January introduced a bill to ban the practice. “We should be doing everything in our power to help people find jobs during these tough economic times — not hinder them.”

Cohen’s sentiments aside, the practice of requiring job applicants to supply credit reports, once unheard of, is spreading at a steady pace. When the Society for Human Resource Management polled its members four years ago, it learned that 13 percent require the credit reports of all applicants, and almost half (47 percent) of its member companies require them of some job applicants, up from 25 percent five years ago.

While more and more voices are being raised against the across-the-board requirement of checking a job applicant’s credit history, most observers do not object when the potential job involves access to money or valuables. Still, civil liberties proponents stress the lack of data to show a causal connection, even as other data show some populations — women, African-Americans, Hispanics — have lower credit scores than others.

As TransUnion’s Rosenberg acknowledged several months later while testifying in Oregon, there are no studies to indicate that low credit scores and low morals go hand in hand: “At this point, we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.” There are studies, though, that link stress and battling the bill collector to diminished work performance.

“There is so little research on the topic that any conclusions would be premature,” organizational psychologist Michael Aamodt told the Equal Employment Opportunity Commission last October during hearings on the use of credit history as an employment screening tool. “This lack of research is especially important to note because there have only been five studies that investigated actual credit history rather than self-reported levels of financial stress.”

Others suggest that in many cases, the real underlying reason may be employers’ fear of being sued if a teller pockets a packet of bills or a home care worker goes home with a patient’s diamond brooch. Having required a credit report gives the employer at least an initial line of defense.

The EEOC’s own chief psychologist, Richard Tonowski, identified four distinct reasons an employer might want to use credit screening and identified alternative (and less intrusive) tests in three of them: to identify productive employees; to identify reliable employees; and to confirm employment history. But in preventing “catastrophic loss” or negligent-hiring lawsuits, he found the way forward a little more problematic. Acknowledging that, after the fact, some bad apples showed financial woes, “We seem not to have good data on employees with similar financial need, but who successfully restrained their greed,” he said.

Tonowski did say that using the screening but not having workplace deterrents such as monitoring in place was only half the battle, although, once again, “The optimal balance of background checking and security measures, both fallible systems, is another area where we do not know enough.”

Sign up for the free Miller-McCune.com e-newsletter.

“Like” Miller-McCune on Facebook.

Follow Miller-McCune on Twitter.

Add Miller-McCune.com news to your site.

Subscribe to Miller-McCune

John Greenya
John Greenya, a Washington, D.C.-based writer, is the author or co-author of 18 books. His work has appeared in The New York Times, The Washington Post, and The New Republic, among other publications.

More From John Greenya

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Recent Posts

October 17 • 4:00 PM

What All Military Families Need to Know About High-Cost Lenders

Lessons from over a year on the beat.


October 17 • 2:00 PM

The Majority of Languages Do Not Have Gendered Pronouns

A world without “he.” Or “she.”


October 17 • 11:01 AM

How to Water a Farm in Sandy Ground

Physicists investigate how to grow food more efficiently in fine-grained soil.


October 17 • 10:00 AM

Can Science Fiction Spur Science Innovation?

Without proper funding, the answer might not even matter.


October 17 • 8:00 AM

Seattle, the Incredible Shrinking City

Seattle is leading the way in the micro-housing movement as an affordable alternative to high-cost city living.


October 17 • 6:00 AM

‘Voodoo Death’ and How the Mind Harms the Body

Can an intense belief that you’re about to die actually kill you? Researchers are learning more about “voodoo death” and how it isn’t limited to superstitious, foreign cultures.


October 17 • 4:00 AM

That Arts Degree Is Paying Off

A survey of people who have earned degrees in the arts find they are doing relatively well, although their education didn’t provide much guidance on managing a career.


October 16 • 4:00 PM

How (Some) Economists Are Like Doomsday Cult Members

Cognitive dissonance and clinging to paradigms even in the face of accumulated anomalous facts.


October 16 • 2:00 PM

The Latest—and Most Mysterious—Player in the Nasty Battle Over Net Neutrality

As the FCC considers how to regulate Internet providers, the telecom industry’s stealth campaign for hearts and minds encompasses everything from art installations to LOLcats.


October 16 • 12:00 PM

How Many Ads Is Too Many Ads?

The conundrum of online video advertising.


October 16 • 11:00 AM

Unlocking Consciousness

A study of vegetative patients closes in on the nature of consciousness.


October 16 • 10:00 AM

The False Promises of Higher Education

Danielle Henderson spent six years and $60,000 on college and beyond. The effects of that education? Not as advertised.


October 16 • 8:00 AM

Faster Justice, Closer to Home: The Power of Community Courts

Community courts across the country are fighting judicial backlog and lowering re-arrest rates.


October 16 • 6:00 AM

Killing Your Husband to Save Yourself

Without proper legal instruments, women with abusive partners are often forced to make a difficult choice: kill or be killed.


October 16 • 4:00 AM

Personality Traits Linked to Specific Diseases

New research finds neurotic people are more likely to suffer a serious health problem.


October 16 • 2:00 AM

Comparing Apples to the Big Apple: Yes, Washington, D.C., Is More Expensive Than New York City

Why shouldn’t distant locales tied to jobs in the urban core count in a housing expenditure study?


October 15 • 4:00 PM

Why Asian American Parents Are the Least Likely to Spank Their Kids

Highly educated, middle-class parents are less likely to use corporal punishment to discipline their children than less-educated, working-class, and poor parents.


October 15 • 2:00 PM

The Federal Government’s New Doctor Payments Website Is Worthy of a Recall

Charles Ornstein takes a test drive using the federal government’s new website for drug and device payments and finds it virtually unusable.


October 15 • 12:00 PM

How Cosmetic Companies Get Away With Pseudoscience

Anti-aging creams make absurd claims that they repair DNA damage or use stem-cell treatments. When cosmetics companies and dermatologists partner to maximize profits, who is responsible for protecting the consumer?


October 15 • 10:00 AM

What Big Data Can Tell Us About the Things We Eat

Pizza might be the only thing that can bring men and women together.


October 15 • 9:04 AM

‘Looking’ at Art in the Smartphone Age

Technology is a great way to activate gallery space, but it shouldn’t take it over.


October 15 • 8:00 AM

A Brief History of High Heels

How what was once standard footwear for 16th-century Persian horsemen became “fashion’s most provocative accessory.”


October 15 • 7:22 AM

Advice for Emergency Alert Systems: Don’t Cry Wolf

A survey finds college students don’t always take alerts seriously.


October 15 • 6:00 AM

The Battle Over High School Animal Dissection

Is the biology class tradition a useful rite of passage or a schoolroom relic?


October 15 • 4:00 AM

Green Surroundings Linked to Higher Student Test Scores

New research on Massachusetts schoolchildren finds a tangible benefit to regular exposure to nature.


Follow us


How to Water a Farm in Sandy Ground

Physicists investigate how to grow food more efficiently in fine-grained soil.

Unlocking Consciousness

A study of vegetative patients closes in on the nature of consciousness.

Advice for Emergency Alert Systems: Don’t Cry Wolf

A survey finds college students don't always take alerts seriously.

Brain’s Reward Center Does More Than Manage Rewards

Nucleus accumbens tracks many different connections in the world, a new rat study suggests.

A City’s Fingerprints Lie in Its Streets and Alleyways

Researchers propose another way to analyze the character and evolution of cities.

The Big One

One company, Amazon, controls 67 percent of the e-book market in the United States—down from 90 percent five years ago. September/October 2014 new-big-one-5

Copyright © 2014 by Pacific Standard and The Miller-McCune Center for Research, Media, and Public Policy. All Rights Reserved.