There's no denying that the recession has negatively affected the credit ratings of many individuals and job applicants in the US. As a majority of employers use credit ratings as a tool in their hiring decisions, legislators are now trying to take steps to help the "out of work" constituents in their states.
Currently 16 states, including Maryland, are considering legislation that would ban or limit employers from checking the credit history of job applicants. Lawmakers believe the practice traps people that are in debt- as their past financial problems may prevent them from finding work.
According to a recent survey by the Society of Human Resource Management, 60% of employers run credit checks on at least a percentage of their job applicants. A typical credit check allows companies to gain access to information about an applicant's debt load, late payments, liens and other financial glitches. (It doesn't show the applicant's overall credit score.) Employers believe the credit history provides valuable information about an applicant's sense of judgment and responsibility.
Of course, not all people with bad credit histories are irresponsible or lack judgment. Many get into credit problems through little fault of their own. It's important for employers to exercise judgment and to take into consideration every aspect of an applicant's skill, education and character when making hiring decisions.
Credit reports should be viewed as only a small part of the screening process. They should be used in conjunction with other pre-employment background checks such as criminal records, education verification and reference checks. Focusing only on one aspect of an applicant's background can cause companies to miss out on good employees.
So- while banning credit checks may be a popular idea- I'm not sure it would have much impact on lowering the unemployment rate and it definitely would take away a valuable tool for employers.